Homeowners on a tracker mortgage rate should try and transfer to a more competitive rate following the hike in interest rate, urges Moneysupermarket.com.
Louise Cuming, head of mortgages at moneysupermarket.com, says: This increase has taken the market by surprise and will have a significant impact on savers and borrowers alike.
“This will be a real blow to many homeowners who may not have factored in an additional base rate rise indeed, many commentators failed to see it coming – so it is likely that some homeowners will have been caught short.
The rise will be most detrimental to those on a tracker mortgage whose repayments will rise in the wake of this announcement.
“What is worrying is that many of these people may already be stretched to the hilt and may struggle with an increase in mortgage repayments – more so as its soon after the Christmas period.
My advice, if you will not incur a penalty to switch mortgage products, is to shop around urgently, especially if you are paying the lenders standard variable rate of around 7%.
“In the first instance borrowers should approach their existing lender to see if they can transfer onto a more competitive rate.
Where possible, chose with a mortgage likely to be affected by this rate rise and who fear they will struggle with any further increases in payments should consider remortgaging to a better or fixed rate product.
“This will help negate the effect of any further increases and future proof themselves for potentially more upward movement in rates.