You are here: Home - Mortgages - Remortgage - News -

What an interest rate rise could mean for your mortgage

Written by: Christina Hoghton
A increase to the Bank Rate will mean many borrowers pay more each month, but you may be able to protect your payments with a fixed rate mortgage

The financial markets are expecting a rise in the Bank of England base rate from 0.1% to 0.25% in December, according to Hargreaves Lansdown.

And the digital wealth management service said a further increase is forecast to 0.5% by March 2022, which could have a huge impact on some mortgage borrowers.

What happens if interest rates rise?

If the Bank of England’s Monetary Policy Commitee increases its Bank Rate, mortgage lenders are likely to follow suit with mortgage rates.

The good news is that they can’t change existing fixed rates so any borrowers currently on a fixed rate mortgage will see no change to their monthly repayments.

Borrowers on a tracker rate mortgage won’t be so lucky. Their payrate literally tracks the Bank Rate at an agreed margin, so they will see an automatic rise to their pay rate within a month of any Bank of England decision.

The same goes if you’re on a variable rate, included a discounted rate or your lender’s standard variable rate, as Sarah Coles, personal finance analyst at Hargreaves Lansdown explained: “If you’re on a variable deal, your rate is likely to increase with the Bank of England’s changes, so you may want to consider bagging a fixed deal before this kicks in, and while there are still real bargains around.

“It’s worth doing this sooner rather than later, because when banks are convinced rises are on the way, fixed mortgage rates will go up well before any announcement. Fixed deals won’t suit everyone, especially if you need more flexibility, but they should always be a consideration.

“After 18 months of rock bottom interest rates, rises could be lurking around the corner, ready to deliver a nasty shock to anyone who has borrowed money. We all need to consider what it would mean for us, and take steps to protect our finances.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Everything you wanted to know about ISAs…but were afraid to ask

The new tax year is less than a fortnight away and for ISA savers or investors, it’s hugely important. If yo...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week