Mortgages 101: Interest rates and inflation: how do they impact homeowners?

The Bank of England has just voted to raise interest rates for the first time in three years.

Rates were cut to 0.1% during the pandemic, and have just been raised to 0.25%

Inflation is now at a 10-year high (5.1%) so we’ve been expecting an interest rate hike for a while.

An increase of 0.25% sounds very small, but in real terms, it could mean that mortgage repayments go up by potentially hundreds of pounds per year.

Most homeowners are on a fixed rate deal, which means they won’t feel the impact of this rate rise until their current deal ends.

However, if the Bank needs to raise interest rates several times over the next 12-24 months (as economists are forecasting), when homeowners do come to remortgage prices could be much higher than they are now.