Mortgage borrowers are set to see their monthly bills soar amid concerns that pressure is building for the Bank of England base rate to be hiked further in order to steady the pound.
A raft of tax cuts unveiled on Friday last week have prompted concerns for the impact on inflation.
There have been suggestions the Bank of England may be forced to step in with an emergency interest rate hike.
The string of Bank of England base rate increases which have already taken place in recent months mean that a tracker mortgage is now about £210 per month more expensive on average than it was before the rate increases started last December.
A standard variable rate (SVR) mortgage is now about £132 more expensive per month, according to the figures from UK Finance.
For anyone whose deal is expiring or on a variable rate, higher rates will add significantly to their monthly costs
Sarah Coles, Hargreaves Lansdown
While the majority of mortgage holders are on fixed-rate deals, 1.8 million fixed deals are scheduled to end next year – meaning some homeowners could be in for a bill shock when they do eventually come to take out a new mortgage.
Some households may consider using any savings to pay down their mortgage, to keep their costs down.
UK Finance said lenders should be in touch with customers towards the end of their fixed term.
The Bank of England increased rates by another half percentage point to 2.25 per cent last Thursday. But financial markets are speculating the Bank may act with another increase before its next scheduled meeting in November.
Stamp duty was among the taxes to be cut in last week’s Budget but rising house prices and mortgage rates are still expected to have a dampening effect on the housing market.
Figures released by Rightmove on Monday showed the average price tag on a home has increased by £2,587 or 0.7 per cent month-on-month in September.
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “Within the mortgage market, more than three-quarters of people are protected by fixed-rate deals.
“However, for anyone whose deal is expiring or on a variable rate, higher rates will add significantly to their monthly costs.”
Ms Coles also said credit card holders may also need to watch out for the cost of their borrowing becoming more expensive.
She added: “Many credit card companies reserve the right to push up rates when the cost of doing business rises, so keep your eye out for notifications.”
Nationwide Building Society reported on Monday that the amount spent by members to pay off debts, such as on credit cards and personal loans, is continuing to increase.
Spending on debt jumped by 18 per cent in August compared with August last year, and increased by four per cent month-on-month.
Nationwide said the increase has largely been driven by people using credit cards to deal with the rising cost of living, as well as those paying off previous debt.
Mortgage spending in August was eight per cent higher than in August 2021, according to Nationwide’s figures.
Spending on rent was up by 17 per cent annually in August, Nationwide said, as the rental sector also deals with the impacts of rising costs.