The pound has dropped against the euro from yesterday’s figures.
It is currently trading at £1.133, a fall from £1.137 on Monday.
This comes in light of positive news surrounding interest rates in the UK following Bank of England (BoE) Deputy Governor David Ramsden stating it could increase sooner rather than later.
The interest rate base rate is currently at 0.5 per cent, having increased from 0.25 per cent last year.
Interest rates increasing are great news for savers in the UK, yet not so great for homeowners.
If the interest rate was to increase by just one per cent, it would increase the mortgage bill in the UK by £10 billion, according to estate agent Savills.
This could add up to £930 a year onto their mortgage payments.
Homeowners on a fixed-rate deal – 59 per cent of the UK – would feel the pinch when their mortgage deal ends.
Lucian Cook, head of residential research at estate agent Savills explained what this means for UK homeowners.
He stated: “This would bring an end to the historically low mortgage costs that have boosted housing affordability and limit the buying power of those needing a mortgage, and underscores our forecasts for more subdued house price growth over the next five years.
“We’d expect first-time buyers in London, whose mortgage costs relative to earnings are already more stretched than for any other group, to be most affected.”
Buy-to-let landlords would also be affected, paying £2.4 billion overall.
Laura Parsons, currency analyst at TorFx commented on today’s exchange rate: “The pound broadly strengthened on Monday after Bank of England (BoE) Deputy Governor David Ramsden indicated that he saw the case for UK interest rates rising sooner rather than later.
“GBP/EUR approached a high of €1.140 before sliding back later in the European session.”
She also explained how the rest of the week could progress.
Ms Parsons stated: “If today’s Eurozone confidence reports show the drop in sentiment forecast by economists the pound could enjoy a fairly sturdy trading session against the euro.
“Germany’s inflation data is also expected to show an annual dip in consumer price pressures – and such a result is unlikely to persuade the European Central Bank (ECB) to turn hawkish anytime soon.”
