A 0.25% rise in the Bank of England base rate will see the average variable rate borrower paying £198 more per year for their mortgage.
There is much speculation that the central bank will look to increase the base rate from its current level of 0.25% next month.
This will signal increased monthly payments for the five million people currently on variable rate mortgages, as lenders pass on the rate rise to borrowers.
Research by online mortgage broker service Trussle found that if the base rate rises to 0.5%, borrowers across the UK will pay an extra £83 million in mortgage payments in the first month alone.
Over the course of the year, borrowers will pay an additional £990 million, equivalent to £198 for each average variable rate customer.
Those in London will be hit hardest by the changes, with the average monthly payment increasing by £30.50. This is equivalent to £336 across a year.
‘Take action sooner rather than later’
Of the five million homeowners on variable mortgages, Trussle says around three million have let their fixed period expire and have reverted to their lender’s standard variable rate (SVR).
Moneywise reported last week how these borrowers can make savings of more than £100 per month if they switch to a new deal.
Ishaan Malhi, chief executive and founder of Trussle, says: “While the increase is only likely to be small at first, borrowers on variable rate deals should consider how they’ll cover the extra cost, especially those on a tight budget or with a large outstanding mortgage.
“With more rate rises potentially on the horizon, those nearing or beyond the end of their initial mortgage term should be thinking about switching to a more competitive deal. Because of the perceived complexity of getting a new mortgage, many people tend to this put this task off.
“As a result, a quarter of mortgage borrowers in the UK have ended up on their lender’s standard variable rate, paying far too much interest. The process of switching has never been easier than it is now, so we urge borrowers to take action sooner rather than later.”