Thousands of homeowners could be £600 worse off as interest rates look set to rise.
The Bank of England said that it would hike interest rates by 0.5 percentage points to 1.75% last week. It is the largest single hike for 27 years, and the highest that interest rates have reached since January 2009.
Alice Haine, personal finance analyst at Bestinvest, said: “It is unusual for a central bank to raise rates when the economy is in danger of falling into a recession.
“But the country is in the grip of a cost-of-living crisis as global challenges such as Ukraine’s war with Russia drive up food and fuel prices to dizzying highs.”
Bestinvest’s Haine added: “The worrying effect of higher mortgage payments is that people have less disposable income to spend at a time when household finances may already be stretched thin.”
The most obvious impact of higher interest rates is that it will become more expensive for people to pay off their mortgages.
People taking out a new loan will soon be quoted a higher interest rate as a result of the Bank’s change.
And those whose mortgages are being renegotiated will likely have to deal with larger bills than they had in the past.
Trade association UK Finance said that the rate rise would likely cost the average person with a tracker mortgage around £600 a year.
Laura Suter, head of personal finance at AJ Bell, said: “Anyone coming to re-mortgage in the next couple of months faces a huge shock in how much their monthly costs are going to rise. Someone coming off a two-year fix would have secured their last mortgage when rates were far lower.”