How will the interest rate rise affect my mortgage?
Posted on 30th September 2022 at 13:00
Over the last week, a number of banks and other lenders have pulled mortgage deals amidst fears for the UK economy following the mini-budget set out by the new Chancellor, Kwasi Kwarteng. The largest tax cuts for 50 years in addition to increased borrowing have sparked new fears that interest rates could increase to 6% by next year. As banks and lenders begin to reintroduce products, consumers are concerned about the potential financial impact this may have on their monthly mortgage payments.
Why have interest rates gone up again?
Interest rates have already gone up six times this year, with the most recent being a rise of 0.5% to 2.25% on the 22nd September. Rates have been steadily climbing since the start of the year in an attempt to slow down inflation. The higher interest rates make borrowing money expensive, which in turn means people will have less money to spend and this will bring inflation down. Nobody has a crystal ball to say with any certainty what is going to happen in the future but according to financial experts, it’s highly likely that interest rates will go up again. The markets are currently working on the assumption that base rates could hit 6% by the end of the first quarter in 2023.
How will this affect my mortgage payment?
If you are on a tracker or variable rate, your payments will go up immediately. If your fixed rate is coming to an end within the next 6 months, there will be implications for your payments when your deal ends so it’s important to start thinking about what happens next. Speaking to an experienced mortgage adviser or mortgage broker is a good idea at this point. If you’ve recently locked into a new fixed-rate mortgage you can relax for the time being as your monthly payments are fixed until the end of the mortgage deal.
My current fixed rate is ending within six months- what should I do?
It’s good practice to know when your current mortgage deal ends as this give you plenty of time to start thinking about what comes next. Many mortgage lenders will let you lock into a new deal 4-6 months before your current product expires, so it’s worth having a conversation with your mortgage adviser or mortgage broker in plenty of time. Your mortgage adviser will be able to contact your existing lender to explore your options and also search the whole of market to ensure you are getting the right deal for your individual circumstances.
My current fixed rate is ending more than six months from now- what should I do?
If you are one of the 1.8 million homeowners who will be looking for a new product next year, it would be a good idea to find out the expiry date of your current fixed-rate mortgage and make a note to contact your mortgage broker or mortgage adviser six months beforehand. This will give the broker plenty of time to discuss your personal circumstances and begin looking for the most suitable deal for you at that point.
Should I pay the Early Repayment Charge (ERC) and find a new deal now?
Usually this would not be recommended as the cost of the ERC may be more than any savings you may make. However, it’s always worth having a conversation with your mortgage broker if you have any questions. They will be able to work out whether this would be beneficial to you.
What should I do if I’m on a tracker or variable rate?
Your mortgage payments will rise immediately, so you may wish to speak to your lender or a mortgage broker to discuss your options as soon as possible. Get in touch now.
What should I do if I can’t afford my mortgage payment?
If you are worried, speak to your lender as soon as possible. They will be able to discuss the options available to you. DO NOT miss your mortgage payment as this may have a serious impact on your ability to get credit in the future.
Citizens Advice will be able to support you and you can also check whether you are entitled to any government support.
Further support can be found here:
How do I find out more?
Call us on 01302 866787 and speak to one of our trusted advisers.
According to our research, the content contained in this article is accurate at the time of writing.
Infomation on this website is NOT bespoke advice to its audience and therefore does NOT constitute financial advice.
Readers are encouraged to contact our qualified advisers directly for mortgage and protection advice.
As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments.
Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home.
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