Mortgage holders will see their yearly costs increase by more than £400 after the Bank of England hiked interest rates to 3 per cent, Martin Lewis has said.
The Money Saving Expert said tracker deals will rise by roughly £40 per month (£480/year) for every £100,000 worth of mortgage.
That means someone with a £300,000 mortgage will pay £1,440 extra per year. “Existing fixes won’t change, but when they end new deals will be far costlier,” Mr Lewis said.
Mr Lewis also advised savers to switch banks if they fail to pass on gains from the interest rise.
“Top paying easy access savings accounts will likely rise but it can take a month,” he said. “Most big bank savings will continue to pay diddly squat, so ditch & switch.”
His comments came after the UK’s central bank increased the interest base rate level by 0.75 per cent to 3 per cent.
The Bank’s move was the biggest hike since 1989 and the eighth consecutive time interest rates have risen as officials try to tackle soaring inflation.
Inflation – or higher prices – is being driven by sky-high energy bills fuelled by Vladimir Putin’s war in Ukraine and the recovery from the Covid pandemic.
In a statement on Thursday, the Bank warned that the UK could be facing the longest period of recession since reliable records began.
The economy could fall into eight consecutive quarters of negative growth if current market expectations prove correct.
That would mark the longest period of uninterrupted decline that the nation has experienced for around a century.
However, it would be a milder recession than in previous times, it said.
From its highest to lowest point, gross domestic product (GDP) is expected to drop 2.9 per cent, a much smaller decrease than the 6.3 per cent drop seen during the 2008 financial crisis.
The Bank also predicted inflation would peak at around 11 per cent at the end of this year, while the unemployment rate could hit 6.4 per cent by the end of 2025.
Decision makers also warned that more rate hikes were likely to come, however, they do not expect a rise as high as the 5.2 per cent that the market has forecast for the final quarter of next year.
“The majority of the committee judges that, should the economy evolve broadly in line with the latest Monetary Policy Report projections, further increases in the Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than prices into financial markets,” the Bank said on Thursday.
The Bank also warned there were uncertainties ahead and said that if inflation looks to be more persistent than the current outlook, it would “respond forcefully”.