Homeowners and house hunters told MailOnline of their misery today as the Bank of England hiked interest rates to a 15-year high of 4 per cent.
Business owner Victoria Williams, who took out a variable mortgage last month, will now have to pay nearly £1,000 more a year due to the announcement.
Meanwhile, NHS worker Rachel Bennett, who once struggled to buy a house with her husband, Jack, says it could now be an impossible dream.
She told MailOnline: ‘It’s almost impossible to get on the property ladder, and now the rates are going up even more. It’s an incredibly frustrating situation.
Victoria Williams, a business owner from Cullercoats in North Tyneside, is dismayed by the Bank of England’s interest rate hike
Miss Williams, who is buying property on her own, decided to take a risk and opted for a tracker at 0.80% above the base rate.
The 39-year-old, five-and-a-half-months pregnant, had hoped rates would stay the same or rise only slightly before plummeting, so she was dismayed to hear of the rise.
Miss Williams, from Cullercoats, North Tyneside, predicted she would face around £960 in additional costs.
“I had a choice of signing up for a fixed-term contract of at least two years at around 6% or opting for a tracker,” she said.
“I knew it was a risk at the time, but if the base rate had stayed at 3.5% I would have been hundreds of pounds better off a month.
“With a baby on the way, I have all kinds of costs to bear and every penny counts.” I’m also buying myself, so I don’t have anyone to split the mortgage with.
“I’m moving from a two-bed apartment to a three-bed house, and my mortgage payments are now tripled.
“My heart sank when I heard the news on the radio this morning, and I feel for the early buyers who will now be completely out of the market.
“I’m extremely lucky because it won’t cripple me, but I’m working hard and that 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 goes up even more.”
‘Rising rates could prevent us from paying for our own accommodation’: Rachel Bennett, 31, with husband Jack (right) and children, Noah, 10, and Lacey, four
Rachel Bennett, 31, lives in South Yorkshire with her project manager husband Jack, 32, 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.
Although they found a “nice property” in the area, they were told that the 10% down payment they were offering was not high enough, which prevented them from continuing with the purchase.
Ms Bennett says the rate hike 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 a lot because we can’t save a lot each month due to rising costs and having children.
“We both work extremely hard for our money and my husband has a well paying job and a great credit store.
The Bank of England raised interest rates from 3.5% to 4% today
“All we want is to buy a house for ourselves and leave something for our children when we are gone.
“I worry about how the world can be when they’re adults – and probably even harder to buy a house!” It is extremely stressful and discouraging.
The base rate was pushed from 3.5% to 4% in the latest measure, the 10th consecutive increase.
It’s the highest level since 2008 – leaving mortgage payers to count the cost as the Bank struggles to contain runaway inflation.
The change will add £50 to borrowers’ average mortgage payments.
However, there are hopes that the tightening cycle may be coming to an end, as the Monetary Policy Committee (MPC) tries to balance the slowing economy against the threat of soaring prices. Governor Andrew Bailey said inflation appeared to have “turned a corner” but it was “too early to declare victory”.
Bank of England Governor Andrew Bailey said inflation appeared to have “turned a corner”, but it was “too early to declare victory”.
The Bank has also sharply lowered its dire estimate for 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 were few signs 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 calling for early tax cuts.
“We will play our part in ensuring that government decisions are consistent with the Bank’s approach, including resisting the current urge to finance additional spending or tax cuts through borrowing, which will only fuel the fire of inflation and prolong the pain for everyone,” he said in a statement.