Around two million mortgage borrowers will have to find the money to pay higher monthly repayments after the Bank of England raised interest rates from 0.75 to 1% on Thursday.
Those on variable deals could see interest charges climb by an average £25 a month, UK Finance said. It based the figure on the average balance of £121,034, but borrowers owing more will see charges rise even further, The Mirror reports.
Around two million people in Britain have variable-rate mortgages. There are two types: “trackers” and “standard variables”. Tracker mortgages rise and fall according to the changes made by the Bank of England. Standard variable products follow the rate of the bank which has made the loan – most banks are expected to raise these products in line with the rate rise next month.
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TSB was the first lender to confirm it would be passing on the higher rates in full last night.
Customers on its “standard variable” and “homeowner variable” mortgages would see payments increase by 0.25 percentage points from June.
Currently TSB’s variable rates stand at 2.74% and 4.74% respectively and will rise to 2.99% and 4.99%. The lender said it was reviewing rates on the rest of its deals, including its fixed-rate mortgages, and savings accounts.
A spokesman said: “The interest rates charged on our variable rate mortgages will increase by 0.25%, in line with previous base rate increases and reductions which we have passed on in full.” It added the vast majority of customers are on fixed deals though.
HSBC increased the rate on tracker deals this morning by 0.25 percentage points with immediate effect. It said it would “review” its standard variable and savings accounts. Its standard variable mortgage currently charges 4.04%.
Barclays will increase its standard variable rate from 5.24% to 5.49% next month. Trackers will also rise next month.
Nationwide said tracker mortgages will increase by the full rate rise on June 1. Savings accounts and variables remain under review.
Santander confirmed its tracker mortgages would rise on June 3 to 4.25%. Customers of variable rates at Alliance & Leicester, part of Santander, will see their payments rise to 5.24%.
Coventry Building Society said it will increase the rates on most of its variable savings accounts from June 1.
Lloyds, which also owns Halifax and Bank of Scotland, said tracker mortgages would rise by the full increase on June 1. Variable deals remain under review.
First Direct raised its trackers this morning (May 6) but said variable deals are under review. Yorkshire building society said trackers will rise on June 5.
The latest interest rise will add more than £50 a month to the costs of a borrower with £250,000 on their mortgage paying the average variable rate of 3.3%. However, the three-quarters of mortgage borrowers who have fixed-rate loans will not be affected.
Thursday marked the fourth consecutive interest rate rise and the highest since 2009, when the Bank slashed borrowing costs to combat the financial crisis. It also marked the first rate rise on an election day since 2004.
Bank of England Governor Andrew Bailey said this should ultimately help bring down inflation in the coming years – it aims to keep it at 2%, but warned it could first reach 10% by Christmas.
Markets expect interest rates to reach 2.25% by the end of the year, with households advised to fix where possible to save on mortgages.
A Treasury spokesman admitted the Government could not “shield everyone entirely” from the effects of the cost of living crisis.
He added: “The UK is not alone in these challenges and while we can’t shield everyone entirely, we are taking action to ease pressures on households and drive growth. We’re continuing to focus on investment in people, capital and ideas to boost living standards in the longer term.”
Natwest has also been approached for comment.