Put simply, it now costs more to borrow money than it did before. The base rate for interest has increased by 0.75%, which means your mortgage is about to get more expensive.
Unsure what it means for you? Money saving expert Martin Lewis appeared on BBC Radio 4′s Today programme to explain how the hikes will impact your bank account and what you should do next.
"It's going to be an absolutely enormous shock for most people"
MoneySavingExpert founder @MartinSLewis tells @BBCSimonJack people should make a diary note six months before a fixed rate mortgage ends: "that's the point to start thinking about what you're going to do"#R4Todaypic.twitter.com/MxMFhJJVzS
— BBC Radio 4 Today (@BBCr4today) November 4, 2022
If you are on a variable rate mortgage or tacker mortgage, you’ll see this rise immediately. The 0.75% increase equates to roughly £40 per month extra per £100,000 of outstanding debt, Lewis explained.
“So if you have a £200,000 mortgage, expect it to be £80 per month [more than it currently is],” he said.
If you have a fixed rate mortgage, you won’t see your repayments go up overnight. But Lewis still issued one vital piece of advice for these homeowners.
“Make sure you know now the date when your fixed rate ends,” he said. “I would have a note in your diary six months before that point. That’s the point to start thinking about what you’re going to do, so that you can be in place three months before your mortgage ends.”
Those who fixed their mortgages two or three years ago at around 2% are likely to be facing rates at around 6% when they renew.
“It’s going to be an absolutely enormous shock for most people,” said Lewis.
If you’re worried about meeting the new costs, the advice is to speak to your lender – do not bury your head in the sand.
Your mortgage lender can set out your individual options, which may include extending the terms of your mortgage to include more years or moving to an interest-only mortgage to enable you to meet payments.
If you are in a position to overpay on your mortgage, now might be the time to do so.
“Overpay if your mortgage rate is higher than the rate you’d earn saving,” Lewis said in a separate post on his website. “Overpaying can save you £10,000s over the lifetime of a mortgage.”
This article originally appeared on HuffPost UK and has been updated.