Bank of England pushes up interest rates to 0.5% – here’s how the first rise for a decade will affect you
The Bank's Monetary Policy Committee voted by 7 to 2 to hike rates for the first time since before the financial crisis
HIGH STREET lenders have already begun to hike rates on mortgage deals following the Bank of England's move to raise interest rates for the first time in a decade.
The decision to raise the base rate by 0.25 per cent to 0.5 per cent was widely expected amid concerns over soaring inflation and consumer debt.
The move will see around 3.7 million variable and tracker mortgage rate customers pay more on their monthly repayments - and some lenders have already announced a hike.
Yorkshire Building Society announced customers on its standard variable rate (SVR) will see an increase of 0.25 per cent to 4.99 per cent.
TSB is also raising the rate on its SVR deals by 0.25 per cent, while RBS confirmed that its customers on base-rate linked mortgages will see a rise of the same amount.
Analysis for The Sun Online found that if the major lenders all decided to increase their SVR deals by 0.25 per cent, customers could be paying as much as £264 a year extra.
The Bank's decision is aimed at trying to curb inflation by dampening demand in the economy by making the cost of borrowing more expensive.
On the news of the interest rate cut the pound dropped 1.5 per cent against the euro to 1.257.
It also fell by almost 1 per cent against the dollar.
The cost of living hit 3 per cent in August - its highest level since 2012.
Policy makers are concerned that consumers are living beyond their means, with fears that the country's £200billion debt-pile could lead to another financial crash.
Last month, banks were asked to set aside an extra £10billion to cover losses from people who can't afford to pay their bills.
Interest rate hike: Who are the winners and losers
Here's how the interest rate rise will affect you.
Savers
Those fed-up with earning next to nothing on their savings will be pleased to see a rise after putting-up with rock-bottom rates for so long.
But while any rate rise will be welcome it won't be a huge benefit.
A rise of 0.25 per cent on a balance of £2,000 will gain just £5 in interest.
Borrowers
There are serious concerns UK households are carrying too much debt after a decade of low-rates made borrowing on credit cards extremely cheap.
New research from consumer website Moneyfacts has found the average card APR is now 23 per cent - a 10-year-high.
With consumers already struggling to meet their monthly bills, a rate hike could mean even more household finances becoming stretched.
On a balance of £5,000, you'll pay just over £1 extra in interest each month.
Those with a tracker or variable rate mortgage
If your mortgage is a tracker or variable rate deal, the rise will mean an increase to your monthly payments.
The increase will only be small, but homeowners need to be aware they'll be paying more - figures from TSB revealed a whopping 68 per cent of homeowners don't know how a rate hike will affect them.
Those with a £200,000 mortgage over 20 years will see their monthly payments go up by £26 - £312 a year.
Those on a fixed-rate mortgage won't be affected by the rise, so if you're looking to buy a property or remortgage it might be worth looking at a fixed-deal instead to protect yourself against more rate hikes.
Earlier this week, the UK's largest building society, Nationwide, became the first lender to confirm it would be pushing up the cost of its variable rate deals.
Based on a £150,000 mortgage over 20 years, customers on its Base Rate Mortgage will be paying £794 a month - an extra £18 a month or £216 a year.
On the same basis, those on the Standard Mortgage deal will now pay £908 a month - an increase of £19 a month and £228 annually.
What is your mortgage provider doing?
JUST minutes after the rise in interest rates was announced some banks began announcing increases on their mortgage rates.
Lloyds/Halifax: Accounts that track the base rate will go up by 0.25 per cent from Nov 3.
Nationwide: Some accounts will go up by 0.25 per cent from Dec 1.
NatWest/RBS: Accounts that track the base rate will go up by 0.25 per cent from today.
Santander: Accounts that track the base rate will go up by 0.25 per cent from Dec 1.
TSB: A rise of 0.15 per cent from Dec 1 on variable rate savings products.
Yorkshire Building Society: A rise of 0.25 per cent on variable savings accounts from Dec 14.
Barclays: Variable mortgages will rise by 0.25 per cent from December 1.
First Direct: It will be reviewing its variable rate products with its tracker mortgages rising by 0.25 per cent as of today.
MoneySavingExpert's Martin Lewis said most people on variable mortgages will see an increase in costs of around £200 a year per £100,000 of outstanding mortgage.
"The bigger picture though is this is likely to be the beginning of the end of uber-cheap mortgages," he said.
"New fixes are already a tad costlier as the market's anticipated rate rises, yet for now, deals are still incredibly cheap.
"Everyone should check to see if they’re overpaying.”
What type of mortgages are there?
THERE are two main types of mortgage. If you're affected by today's rate rise depends on which one you've got.
Fixed-rate: A mortgage where the interest rate is 'fixed' for the length of time of the deal. More than half of UK homeowners are on this type of mortgage and their monthly repayments won't be affected by today's rise.
They typcially last two or five years but lenders will likely face a more expensive deal when their current fix comes to an end.
Variable-rate including tracker: The rate you pay is based on the base-rate and today's rise will be reflected in higher monthly costs. A tracker mortgage tracks base rate, so if it rises, payments increase and if it falls, payments fall.
With standard-variable deals, lenders can move the rate as they wish but again, it normally follows base rate, so today's rise will be passed on to customers eventually.
Rates have been at a record lows for more than 10 years following the credit crunch, with the Bank using cheap borrowing as a way to stimulate the economy.
But savers have had a tough time of it, with low rates reflected in dismal returns on their savings.
Some money charities had warned the Bank against rising rates, with concerns that even a slight increase in the cost of borrowing could be too much for some households.
What will a rate rise mean for renters?
While tenants don't have mortgages, they could be exposed to rising rents.
Research from property investment firm Landbay suggests that landlords could be forced to pass on any increases they face in mortgage payments to their tenants.
It said while many experts expected rents to rise before now due to changes in buy-to-let rules, the number of cheap mortages on the market meant landlords didn't need to pass on any increases.
But today's hike could "prove to be the starting gun on rapid rent increases," Landaby warned.
Overall the average cost of renting across the UK is £1,196 a month.
But those in London pay much more than the rest of the country - forking out £1,874 a month on average compared to those in Wales who pay just £642 a month.
Joanna Elson, chief exec of the Money Advice Trust, said: "This could be a turning point for many households.
"Future rises are likely to be slow and gradual but even small increases in costs could cause significant problems for many households.
"High levels of household debt, a renewed squeeze on wages and now the prospect of higher interest rates threaten to be a dangerous mix for many households."
And research from regulator, the Financial Conduct Authority (FCA), found that 17 per cent of households would struggle to make ends meet if their monthly bills went up by just £50.
More than half of Brits - 26million - are financially vulnerable, the FCA said.
One landlord reveals the impact the move will have on tenants
LIKE millions of landlords nationwide, Kelly Davies will be forced to pass on today's hike in interest rates to her tenants.
In addition to the family home in Penarth, Wales, where she lives with her husband James, Kelly also owns a buy-to-let property in Cardiff.
Until now, Kelly - who has a variable mortagage on her family home, and an interest-only loan on her second property - has never experienced an increase in interest rates.
But following the Bank of England's move today, the mum-of-one is among homeowners facing higher bills on both properties.
She said: "We've had it good for a while as our residential mortgage has only decreased.
"We've had time to overpay our mortgage and in terms of monthly increases on our home... we won't really notice it.
"But we've also got a buy-to-let property and may have to increase the rent for our tenants to recoup our extra costs"
"They are really good tenants and we don't want to drive them out so we'll do everything we can not to do it.
"I'm worried about the long-term effect it could have on renters."
More on money
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected] or call 0207 78 24516
BB