Bank of England hikes interest rates to 3 percent - here is what it means for your mortgage

It is likely to impact millions of homeowners across the UK.

The Bank of England has announced it is raising interest rates to what is the highest rate since the recession in 2008. After nine members of the Monetary Policy Committee voted by a majority of 7-2 on November 3, the base rate will now jump from what was 2.25 percent to 3 percent.

The 0.75 percent increase is the biggest interest rate rise since since 1989 and is also the eighth consecutive time that the Bank has hiked interest rates, with the base rate just 0.1% less than a year. The all-important decision was made by the Bank in a bid to control inflation amid the crippling cost of living crisis.

Millions of homeowners across the UK are now thought to be affected as mortgages rates could spike in line with the interest rate rise. The 0.75% increase is expected to raise monthly mortgage repayments for those who are on variable rates mortgage deals and other forms of borrowing.

Mortgage rates soared in September after the mini-budget was delivered by former Chancellor, Kwasi Kwarteng, while former Prime Minister Liz Truss was in power. After this many lenders began pulling their mortgage products from the market as they needed time to reprice them.

It is now thought that the latest interest rate rise will create panic and anxiety throughout the property market once again.

Jonathan Samuels, CEO of Octane Capital, said: “While the mortgage market has settled in recent weeks, today’s latest base rate hike will certainly sow more seeds of panic amongst the nation’s homebuyers and who can blame them after witnessing the largest single increase since 1989.

"The average homebuyer opting for a variable rate mortgage can expect to see the cost of their monthly repayment increase by around £166 per month as a result of today’s increase.