The BEO has increased interest rates again from 1.25% to 1.75% as it struggles to hold back rising prices. Inflation is estimated to peak at 13% in October 2022, a forty two year high.
As a result, the increase will see loans and mortgages become more expensive.
This is not good news for first-time buyers, coming at a time where property prices are up 11% in a year, with the average house sitting at at £271,209.
For current home-owners on a tracker at 2.5%, the interest rate would rise to 3%, adding £38 a month to a £150,000 repayment mortgage with 20 years remaining.
“Whilst paying a couple pounds more per month might not seem a lot, rate increases can actually add tens of thousands to the cost of your mortgage overall.” said James Holden from leading protection broker Protect Line.
“Out of the millions of people with life insurance in the UK, the majority have determined their cover level based on their outstanding mortgage. This has now potentially changed, or will change after fixed periods come to an end, and therefore we encourage policy holders to immediately review their cover to see if it still meets their needs!”
With many households struggling financially and the UK expected to fall into a recession during the final three months of this year, life insurance can act as a security blanket to those left behind after a loved one dies.
According to the Association of British Insurers, one in four breadwinners in the UK do not have life insurance, leading to a £263 billion protection gap for families. The BoE rate increase could see this protection gap widen significantly, despite 8.5 million people having life insurance in place.