Monday, 16 May 2022

Homeowners feel squeeze

INTEREST rates rose again in February for the second time in two months, doubling from 0.25 to 0.50 per cent.

In response, banks and building societies have started putting up repayment amounts for homeowners on variable rate mortgages.

There could be more interest rate hikes in the coming months, as the Bank of England attempts to keep a lid on rising inflation.

This comes at a time when both homeowners and renters are facing a sharp increase in the cost of living, driven mainly by growing energy prices.

On February 1, the Office of National Statistics said that: “With two-thirds of adults in Britain reporting their cost of living increased in the past month, rising energy prices are a growing factor in the squeeze on household budgets.

“Of those who reported a rising cost of living in January, 79 per cent cited higher gas and electricity bills as a cause.

“Fuel  costs  rose considerably last October following a 12 per cent rise in the Office of Gas and Electricity Markets energy price cap, which  limits  the amount suppliers can charge customers on default energy tariffs.

“The energy regulator is due to review the price cap again this month, and  prices  could rise  even  further when it is implemented in April.”

Last week, Martin Lewis, founder of consumer website MoneySavingExpert.com said: “The cost of living crisis came to a head today, with UK interest rates doubling and a rise of 54 per cent in energy bills from April 1 for 22 million homes that was previously unthinkable.”

He said the 0.25 percentage point increase in the Bank of England base rate “will add fuel to the financial fire for some, especially those on variable rate mortgages and particularly for those who are trapped on those rates and unable to switch. It will see variable rate mortgage-holders likely pay around a typical £12 per month rise per £100,000 borrowed.”

In an attempt to ease the financial burden slightly, Chancellor Rishi Sunak has announced a £150 council tax rebate for homes in bands A to D, and a £200 deduction on energy bills in October that will need to repaid at £40 per year from 2023 onwards.

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