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Rate rise will cost borrowers £292m

Wave of long-term fixes expected to protect against further increases

The 0.25 per cent rise in bank base rate last week was little surprise for the mortgage industry which is expecting another quarter-point increase early next year.

The new rate is a five-year high and there are concerns some borrowers could be stretched. The Council of Mortgages Lenders has voiced fears that credit has been made too easily available by some lenders.

Some experts expect a flurry of long-term, fixed-rate deals to be snapped up to protect against new rises.

Online bank Egg believes the new increase could cost borrowers a total of £292m a year in extra repayments, with average monthly repayments on a £100,000 mortgage likely to rise by around £15.

CML director-general Michael Coogan says: “In recent months, concerns have been raised about lenders making credit too freely available and borrowers taking on more debt than they can sensibly manage. This rate rise will undoubtedly fuel these fears. Borr-owers should be factoring into their finances the effects of at least one more rise.”

Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi says: “For those on the lookout for a new fixed-rate deal, it would be advisable to secure one now rather than adopt a wait- and-see approach.”

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