The Bank of England today raised interest rates for the first time in a decade.
The bank has increased its base rate by 0.25 percentage points to 0.5 per cent. It's a small increase, but what does it mean for mortgages?
Yael Selfin, chief economist at KPMG UK, said that although the change was small, it could have a significant impact on borrowers because there is a "whole new generation of borrowers who have never experienced a rate increase". This group could represent more than 20 per cent of all mortgage holders, she said.
However, it won't affect everyone immediately. A large proportion of mortgage holders are on fixed rates. If you're on a fixed-rate mortgage, you will be sheltered from any changes to mortgage lenders' rates until the end of your fixed period.
Today's rise is significant because it marks a broader turnaround: more rate rises will be on the horizon after today.
Shaun Church, director at Mortgage Broker Private Finance, said:
Mortgage rates appear to be bottoming out and have been inching up among some lenders in recent months. The change in the base rate makes further rises more likely, although these would only be very gradual.
Richard Stone, chief executive at The Share Centre, said further increases in the base rate could come if the UK economy performs well and inflation does not fall back sharply.
Lucian Cook, Savills' head of residential research said that these increases were unlikely to cause significant financial problems for homeowners, as it is likely increases will be small, and spaced out.
If you are looking for a good fixed-rate mortgage to shield yourself from future rate rises, move quickly. Many mortgage providers will have been changing their rates already in anticipation of today's rate rise.
David Whittaker, chief executive of Mortgages for Business, said:
The most aggressively priced fixed rate products available to home-buyers and landlords are already disappearing so borrowers will have to act quickly if they want to protect themselves against further rises by locking into a good five year fixed rate now.
Some people will be affected immediately, of course. Borrowers on variable rates should prepare for higher payments. And, higher bills are in store for anyone on a fixed-rate mortgage which is near the end of its fixed term. Monthly payments will lift; an increase of 0.25 per cent on a £150,000 standard variable mortgage at 4.5 per cent over 25 years, would see payments rise by more than £20 per month.
Digital mortgage broker habito has estimated that collectively the rate rise will cost homeowners an extra £1.44bn a year.