Mortgages
Just under a third of households have a mortgage, according to the government’s English Housing Survey, external.
About 600,000 homeowners have a mortgage that “tracks” the Bank of England’s rate, so a base rate change has an immediate impact on their monthly repayments.
But the vast majority of mortgage customers have fixed-rate deals. While their monthly payments aren’t immediately affected by a rate change, future deals are.
Mortgage rates are still much higher than they have been for much of the past decade.
As of 6 May, the average two-year fixed mortgage rate was 5.16%, according to financial information company Moneyfacts, and a five-year deal was 5.09%. The average two-year tracker was 5.16%.
This means many homebuyers and those remortgaging are having to pay a lot more than if they had borrowed the same amount a few years ago.
About 800,000 fixed-rate mortgages with an interest rate of 3% or below are expected to expire every year, on average, until the end of 2027. Their borrowing costs are expected to rise sharply.
Lenders have been reducing rates on new fixed deals in expectation that UK interest rates will fall further.
You can see how your mortgage may be affected by future interest rate changes by using our calculator:
