If interest rates were to rise one percent, the average UK homeowners could pay an additional £930 a year for servicing mortgages. That’s the word coming from real estate agent Savills.
According to Savills, borrowers who have a variable interest rate mortgage would be the first group to see their mortgage bills rise, with a yearly mortgage bill of £4.3 billion. Savills said the other 59 percent of borrowers with a fixed-rate mortgage would see an increase after their existing deals expire.
Savills also said buy-to-let landlords would see another £2.4 billion they’d have to pay. Other homeowners would pay an additional £7.8 billion.
Savills Residential Research Head Lucian Cook said this means the “historically low mortgage costs” that helped people buy homes would be over and it would hinder the power people have to make a purchase. He also said it underscores predictions of a more passive house price increase for the next five years.
Savills predicts the average UK house price increase will be 14 percent for the next five years.
Last year, borrowers were hit with a percentage increase in interest rates to 0.5 percent, up from 0.25 percent. They’re readying themselves for another increase.
Mark Carney, Bank of England governor, said borrowers could anticipate additional rate increases, but that the increases would be done steadily.
With base rate increases in the future, homeowners searching for a good long-term deal on their repayments may discover the offer rates have also increased.
Savills’ findings are based on data from trade body of British banks UK Finance and the Bank of England.
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