Homeowners Facing Costly Rates Hike
Homeowners are facing bigger mortgage repayments after a surprise interest rate hike.
The Bank of England raised the rate by 0.25% to 5.25% in a move that shocked the City.
Economists had predicted the cost of borrowing would stay steady despite rising levels of inflation and the buoyant housing market.
The increase means the interest rate has effectively gone up by more than 15% since last summer.
It is now at the highest level since May 2001.
The 0.25% rise is likely to cost homeowners with an 100,000 mortgage an extra 16 a month.
If lenders pass on the full hike in rates, monthly repayments on a 100,000 loan will increase from 706.77 to 722.80, based on a new mortgage rate of 7.25%.
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The Bank said it imposed the hike because of increasing risks over inflation.
It said: “Sterling has risen and oil prices have fallen back.
“But the margin of spare capacity in the economy appears limited, adding to domestic pricing pressures. CPI inflation was 2.7% in November.
“It is likely that inflation will rise further above the target in the near term, but then fall back as energy and import price inflation abate.
“The risks to inflation now appear more to the upside.”
Industry leaders said The Bank of England had delivered an “unnecessary blow” to retailers and manufacturers.
The announcement had an immediate impact on the stock market, with the FTSE 100 Index losing earlier gains to stand marginally in negative territory.