The year is only one-third over and it seems as though the news goes from bad to worse in the area of personal finance. Not only have Britons been hit with the fact that the UK is caught up in a double dip recession and the euro zone is still beset by a huge debt crisis but now major banks have announced that their mortgage rates will be going up as of today, 1 May.
For greater than 1 million homeowners mortgage payments may increase by as much as £200 annually because of these higher rates and the travesty in this is that many of these homes are already in negative equity. This is a huge problem for homeowners who might otherwise be able to refinance their homes because it would be virtually impossible to get a loan larger than the value of the home.
Halifax alone has approximately 850,000 customers who may be paying this £200 extra each year due to these higher rates. Other lenders who have announced an increase in mortgage rates include Clydesdale, Co-operative Bank, RBS and Yorkshire banks. These lenders have announced that rates will rise by as much as 0.5 percentage points for their current customers and is indicative of the fact that the days of low interest rates are over.
Although the Bank of England has kept rates at historic record lows, 0.5%, lenders are raising rates because they feel it is warranted by a floundering economy. During this time when households need as much help as possible, they seem to be getting hit from all sides from taxes to mortgage rates. Finding themselves in negative equity compounds the problem which may make things significantly worse for personal finance as well as the UK economy that is already in trouble.