Homeowners and house hunters told MailOnline of their misery today as the Bank of England hiked interest rates to a 15-year high of four per cent.
Business owner Victoria Williams, who signed up to a variable mortgage last month, will now be left paying nearly £1,000 more a year due to the announcement.
Meanwhile, NHS worker Rachel Bennett, who has already been struggling to buy a house with her husband, Jack, says it may now be an impossible dream.
She told MailOnline: ‘It is nearly impossible to get onto the property ladder, and now rates are going up even more. It’s an impossibly frustrating situation.’
Victoria Williams, a business owner from Cullercoats in North Tyneside, is dismayed by the Bank of England’s interest rate rise
Miss Williams, who is buying a property on her own, decided to take a risk and opted for a tracker at 0.80 per cent above base rate.
The 39-year-old, who is five and a half months pregnant, had hoped rates would remain the same or rise only slightly before falling, so was dismayed to learn of the hike.
Miss Williams, of Cullercoats, North Tyneside, predicted she would face around £960 in extra costs.
‘I had the choice of signing up to a fixed term for a minimum of two years at around six per cent, or opt for a tracker,’ she said.
‘I did know it was a risk at the time, but if the base rate had remained at 3.5 per cent I would have been hundreds of pounds a month better off.
‘With a baby on the way, I have all kinds of costs to shoulder and every penny counts. I am also buying on my own, so I have no-one to share the mortgage with.
‘I am moving from a two bed flat to a three bed house, and my mortgage repayments are now set to treble.
‘My heart sank when I heard the news on the radio this morning, and I feel for first time buyers who will now be completely priced out of the market.
‘I am extremely fortunate in that this won’t cripple me, but I work hard, and it means making sacrifices at a time when I should be looking forward to welcoming my new baby.
‘I shudder to think what will happen if it rises any further.’
‘Rising rates could leave us never being able to afford our own place’: Rachel Bennett, 31, with her husband Jack (right) and children, Noah, 10, and Lacey, four
Rachel Bennett, 31, lives in South Yorkshire with her 32-year-old project manager husband, Jack, and their two children, Noah, 10, and Lacey, four.
They are currently renting a two-bedroom terraced house from a housing association, with the couple forced to share their bedroom with their daughter.
Despite finding a ‘lovely property’ in the local area, they were told the 10 per cent deposit they offered was not high enough – leaving them unable to go ahead with the purchase.
Mrs Bennett says rising rates would ‘potentially’ be the difference between her and Jack ever being able to buy their first home.
She told MailOnline: ‘We have some savings but not much due to being unable to put a lot away every month due to rising costs and having children.
‘We both work extremely hard for our money and my husband has a well-paid job and an excellent credit store.
The Bank of England raised interest rates from 3.5 per cent to 4 per cent today
‘All we want is to buy a place for ourselves and leave something for our children when we are no longer here.
‘I’m concerned for how the world may be when they are adults – and probably even harder to buy a home! It’s extremely stressful and disheartening.’
The base rate has been pushed from 3.5 per cent to 4 per cent in the latest move,-the 10th successive increase.
It is the highest level since 2008 – leaving mortgage-payers counting the cost as the Bank struggles to contain rampant inflation.
The shift will add £50 to the average borrowers’ mortgage payments.
However, there are hopes the cycle of tightening could be coming to an end, as the Monetary Policy Committee (MPC) tries to balance the slowing economy against the threat of spiralling prices. Governor Andrew Bailey said inflation seemed to have ‘turned a corner’ but it is ‘too early to declare victory yet’.
Bank of England governor Andrew Bailey said inflation seemed to have ‘turned a corner’ but it is ‘too early to declare victory yet’
The Bank has also sharply downgraded its dire estimates about the economy, although it still predicts a shallow recession.
Mr Bailey pointed to the huge rise in economic inactivity among the over-50s after Covid, warning there was little sign so far people were returning to work.
Chancellor Jeremy Hunt said he supported the Bank’s decision, and gave another blunt rebuttal to Tory MPs pushing for early tax cuts.
‘We will play our part by making sure government decisions are in lockstep with the Bank’s approach, including by resisting the urge right now to fund additional spending or tax cuts through borrowing, which will only add fuel to the inflation fire and prolong the pain for everyone,’ he said in a statement.
Speculation has been mounting that rates could top out at 4.5 per cent or 4.25 per cent next month, before coming back down.
The Bank upgraded its outlook for the economy from the previous forecast of a recession lasting eight quarters – which would have been the longest since reliable records began in the 1920s.
It now expects a recession of five consecutive quarters with GDP falling 0.5 per cent this year, a shorter and shallower drop than previously thought.
The Bank said that the recession will see peak-to-trough GDP drop by 1 per cent, compared to a previous forecast of a 3 per cent drop.
GDP is thought to have risen by 0.1 per cent in the final quarter of last year, but will contract in all four quarters of this year and the first quarter of 2024.
The 0.5 per cent drop forecast for the 2023 calendar year is a reduction of one percentage point from the MPC’s November forecast. But output will not return to pre-pandemic levels until 2026.
Mr Bailey provided some optimism earlier this month, suggesting the country’s inflation woes have turned a corner.