MORE than 200,000 Scots homeowners face mortgage bills rising by hundreds of pounds a year after the Bank of England hiked the base rate of interest to 3%.

It hiked interest rates by 0.75 percentage points from 2.25% — the highest level since 2008 - and warned there could be more rises to come.

It is the eighth time in a row the Bank of England has raised rates in an attempt to get control over rising prices.

The Bank of England also forecast that the UK is facing a “very challenging” two year recession - which would be the longest on record.

Interest rates have been rising since last December as inflation has soared to its worst level in four decades.

Inflation, which hit 10.1% in September, is expected to peak at 11% this winter before falling next year.

The rise is the biggest since Black Wednesday in 1992, when interest rates briefly rose from 10% to 15% as the pound collapsed.

the interest rate influences things like mortgages, repayments on credit card debt and the interest paid on savings accounts.

Homeowners on Standard Variable Rates (SVRs) or tracker mortgages, which fluctuate with the Bank of England rate, will be hit the hardest by the latest increase.

Industry estimates suggest around 200,000 Scots are on variable rate loans.

Since December, when the base rate was 0.1%, the average monthly mortgage payment has increased £284.17 for the average tracker, and £178.70 for the average SVR.

The Herald:

More than 100,000 fixed-rate mortgage deals which it is estimated are scheduled to end during 2022 in Scotland will also be hit. There are also concerns about affordability for first-time buyers trying to get on the housing ladder.

Analysis by Moneyfacts estimates that standard variable rate mortgages are now expected to soar to 5.86% this month. Before interest rates started rising in December it was at 4.4%.

Meanwhile, the typical two-year fixed rate mortages is expected to high 6.47% this month - compared to 2.34% in December, 2021.

Rachel Springall, Moneyfacts financial expert said: “The unnerving uncertainty surrounding interest rate pricing on mortgages has been prevalent over the past couple of months. This latest base rate rise may well stir further concerns on how this will flow through the market and impact the mortgage repayments of consumers who are already facing a cost of living crisis.

"Due to the unpredictable nature of the mortgage arena, it is imperative that both those looking to purchase a property or who wish to refinance seek independent advice from a broker to navigate the options available to them."

Bank governor Andrew Bailey has previously been criticised for not hiking rates faster to counter inflation.

He said the reasons for the rise is because inflation was too high and "it's the bank's job to bring it down".

The Herald:

"People should not have to worry about inflation as they go about their daily business," he said. "That is why we have been raising interest rates and did so again today.

"If we do not act forcefully now, it will be worse later on.

"And as the forecast shows there is a tough road ahead."

He said that to ensure that inflation is reduced, the bank rate may have to go up again in the coming months.

The war in Ukraine and the long recovery from the pandemic are also being blamed for rising energy and food costs The value of the pound fell by 1% to $1.12 earlier this morning.

he Bank of England has warned that the UK is facing its longest recession since the great depression - a century ago.

In its outlook for the UK economy, it said that a downturn will likely last for two years and that the unemployment rate will nearly double.

The Bank had previously expected the UK to fall into recession at the end of this year and it would last for the entirety of 2023.

It now forecasts that the UK economy already entered a downturn in the summer, which will continue for next year and into the first half of 2024 – a possible general election year.

While it will not be the UK’s deepest downturn, it will be the longest since records began in the 1920s.

Ms Stringer added: “Amid interest rate rises, fixing for the longer-term may be an attractive choice for those who want peace of mind with their mortgage repayments.

"However, whether now is the time to take out a new deal really will depend on someone’s circumstances, particularly for first-time buyers who may be struggling to build a deposit and who have limited disposable income. That said, because of rising house prices, those remortgaging may find they have more equity in their home to drop down into a lower loan-to-value bracket, where more competitive interest rates could be found.

Citizens Advice Scotland  financial health spokesman Myles Fitt said: “The hits just keep on coming for people’s finances and household budgets. Today’s announcement will lead to higher mortgage payments for many along with more expensive debt repayments.

“And this is on top of increases in energy bills, petrol costs, food and other living costs while wages stagnate, so it is little wonder CABS are seeing increasing numbers of people who are just unable to cope.

“Mortgages in particular are fast becoming a major issue for CAB clients. Our online advice page on mortgages had seen an increase of nearly 300% from the same period last year. Today’s announcement is going to make this problem a whole lot worse for homeowners across the country.

“The cost of living crisis isn’t so much squeezing people’s financial wellbeing, it’s crushing it.

“We call on the Chancellor to recognise in his upcoming budget that more support is urgently needed for households in or at risk of financial distress.