510,000 UK home loans see average £30.72 monthly jump

The average monthly mortgage payment for 510,000 homeowners in the United Kingdom rose by £30.72 following a decision made at lunchtime on Thursday. The Bank of England increased the base rate by 0.25 percentage points, moving it from 3.75% to 4%. This marks the first rise in interest rates in more than three years.

According to UK Finance, these 510,000 loans represent approximately 6% of all outstanding homeowner mortgages. The body calculated the £30.72 figure based on typical outstanding balances. An additional 470,000 deals are on standard variable rates, which lenders set individually. If a lender passes on the full 0.25 percentage point increase, the average payment on these deals will rise by £14.28 per month.

Most homeowners are shielded from the immediate impact. UK Finance noted that 87% of outstanding mortgages are fixed-rate deals. However, the data indicates that roughly 700,000 fixed-rate mortgages expire in the second half of this year. A further 2.3 million fixed deals are scheduled to end in 2027.

Industry leaders offered mixed perspectives on the move. Andrew Montlake, chief executive of Coreco mortgage brokers, described the change as another turn of the financial screw. He advised borrowers to start planning early if their deals are ending. Richard Donnell, executive director at Zoopla, stated that higher rates have already slowed housing activity, with sales agreed down 8% compared to last year. He predicted this latest increase would cause more buyers to pause their decisions.

Frances Haque, chief economist at Santander UK, questioned whether this is a precautionary measure or the start of further hikes. She cited rising energy prices and inflation expectations as factors that could lead to additional increases in 2027. Meanwhile, Savills director of research Emily Williams forecast that house price growth would accelerate to 5.0% in both 2029 and 2030.

The rate hike also affects savers. Jenny Holt, customer savings and investment director at Standard Life, said higher rates could bring better returns on cash, though banks may not pass on the full increase. Sarah Pennells, a consumer finance specialist at Royal London, urged savers to check if their rates have actually risen and to consider moving money to more competitive accounts.

Gaurav Shukla, CEO of Home Me Mortgages, advised that the increase will be felt differently across households. He suggested securing a rate now rather than waiting to see if rates improve. Dave Huggett, founder of Lucid Foreign Exchange, noted that a quarter point increase equates to about £20 per month for every £100,000 borrowed, urging borrowers to verify their lender's charges before renewal dates arrive.