How mortgage bills could climb for millions as expert says to buy now

Mortgage costs are set to rise for many homeowners after interest rates increased, with anyone on a standard variable rate or tracker deal likely to see their monthly payments go up.

The Bank of England raised the base rate from 3.75% to 4%, with only one member of the committee voting for a bigger increase to 4.25%.

Analysts say more rises could follow over the coming year, and some forecasts suggest the rate may reach 5% within the next few years.

Adam Parker, founder of Muswell Rose, told LADbible that the move is “not ideal” but is still far less dramatic than the sharp jumps seen a few years ago, when rates climbed much more quickly.

He said borrowers on fixed-rate deals will not feel an immediate impact, but those on variable or tracker mortgages will see payments rise, while anyone remortgaging when a deal ends may also face higher costs.

“About £15 a month for every £100,000 borrowed over 25 years”

Parker said the 0.25 percentage point rise will add to bills for borrowers who are not on a fixed deal.

“For tracker and variable rate borrowers, payments will go up roughly in line with the rise. About £14 to £15 a month for every £100,000 borrowed over 25 years, so around £30 a month on a £200,000 mortgage,” he explained.

“For everyone else, it’s less clear-cut. Lenders knew this was coming, so many have already priced it in. I’ve already heard of a few lenders putting their rates up by more than the base rate rise, and others actually cutting their rates below where they were before.

“What matters is the rate your lender actually offers, not the headline figure, which is why it pays to shop around.”

He added that people searching for a fixed deal may already be finding higher rates at some lenders.

For example, someone with a £200,000 mortgage on a 4.5% deal moving to 6% could see payments rise by about £177 a month.

“Get on the ladder now, or accept you probably never will”

James Buckley-Thorp, founder of Atlian AI, argued that even though monthly payments are rising, the market currently favours buyers because they have more choice.

“Here’s what the market won’t admit: you can’t have cheap rates and plenty of choice at the same time,” he said, noting that more homes being sold gives buyers more options.

He also said that any higher monthly cost could be offset if buyers negotiate a lower purchase price, adding that first-time buyers still have some leverage.

“When the market is full of property, sellers have to listen to sensible offers,” he said.

“First-time buyers with a mortgage in principle are the people sellers want most, and they should be offering low.”

On whether now is the right time to buy, he said the decision comes down to personal comfort with risk.

“You either have the nerve to step onto the ladder, or you’re comfortable renting and handing that risk to someone else,” he argued.

“Both are fine. But waiting for low rates and lots of supply at the same time is a fantasy. Get on the ladder now, or accept you probably never will.”

Experts say this could be a buyer’s market, and taking a few thousand pounds off the asking price could make a meaningful difference.

“Buyers may have more room to negotiate”

Parker agreed that many buyers choose fixed-rate mortgages to protect themselves from changing rates, but said the price of the home itself is still a major factor.

He said prices may ease slightly, giving buyers more scope to negotiate.

“If you can get the property cheaper, you need to borrow less, which can bring your monthly payments back to what you expected before the rise,” he said.

“If your finances are ready and you could still manage if rates rose again, there’s no reason to sit on the sidelines.”