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November 2, 2022

How Will Rising Interest Rates Affect My Mortgage?.

By Emma Jones

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With life becoming ever more expensive, these events might be making you feel stressed. Don’t worry; we’re here to support you. A team of expert mortgage brokers specialising in helping everyone achieve their homeowning ambitions no matter the odds, When the Bank Says No is on your side.

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Interest rates are on an upwards trajectory, and many borrowers are worried about the implications for their mortgage repayments. In September, The Bank of England raised their base rate to 2.25% – the seventh rise since December 2021 – and in November the rate rose again to 3%. Some experts predict rates could hit around 5% by 2023.

With life becoming ever more expensive, these events might be making you feel stressed. Don’t worry; we’re here to support you. A team of expert mortgage brokers specialising in helping everyone achieve their homeowning ambitions no matter the odds, When the Bank Says No is on your side.

Here’s everything you need to know.

How will rising interest rates affect my mortgage?

For the 2.2 million people in the UK currently on a variable rate mortgage, the rise in interest rates is bad news – potentially increasing household expenditure by hundreds of pounds a month. And that’s something nobody needs right now.

While 37% of mortgage holders are protected from these rises for the next two years, the majority of borrows will see their effects soon, if they haven’t already. This is because when the Bank of England alters the base rate for the entire country, lenders and banks will review interest rates on their products and increase them as they see fit, unless there are any caps in place.

Depending on the mortgage deal you’re currently on, this change can have implications for your repayments because you will start being charged at this higher rate of interest on the original loan amount.

Will my mortgage repayments go up when interest rates rise?

It is customary for lenders to review their ‘sales’ interest rates on products when the Bank of England increases the base rate. The way in which your mortgage repayments are affected by this will depend on the type of mortgage deal you have, and – crucially – when this deal ends. Let’s explore how the effects vary deal to deal.

Variable rate tracker mortgage.

Tracker mortgages are directly linked to the Bank of England’s base rate, tracking any fluctuations plus a set margin of around 1-2%. That means if the base rate changes, there will be an immediate and significant impact on your monthly repayments.

Standard variable rate mortgage.

Standard variable rate mortgages are similar to tracker mortgages, changes to the base rate will increase the mortgage rate you get charged. The key difference to note, however, is that the effect is at the lender’s discretion, so it’s important to check your terms and conditions for clarity.

Fixed rate mortgage.

Finally, fixed rate mortgages are not affected by changes to the base interest rate set by the Bank of England. For a set period of time, you will pay a predefined amount each month, with no external factors increasing or decreasing the interest rate. When your fixed rate period comes to an end, however, you will revert to your lender’s standard variable rate which will be impacted by rising interest rates. If this is on the horizon for you, it might be worth searching the market for a more cost effective deal before your end of term arrives.

How to deal with rising mortgage rates.

With everyone feeling the pinch at the moment, rising interest rates can be extremely worrying. The good news is there are things you can do to limit the impact these changes have on your household finances, and help is always out there if you need it.

Check your deal.

First things first, get hold of the facts. Find out what deal you’re currently on, read the terms and conditions, and work out exactly how these changes are going to impact your repayments – now, and in the near future.,

Plan your finances.

It’s important to work out what you can afford so you can understand what the options are and whether you need to remortgage. If the increase in interest rates has made your mortgage unaffordable, you need to take action fast.

Prepare for changes.

It’s worth creating a budget to see if you can cut back in other areas of your life to accommodate the additional amount. If the rates changes aren’t affecting you right now but might in the future, take the opportunity to start building a savings buffer.

Consider remortgaging.

Remortgaging is when you move your mortgage from one lender to another, or swap to a different deal with the same lender. If you’re facing a dramatic increase to your monthly repayments, remortgaging can be a suitable option. Talk to our team to find out more.

The remortgage process, explained >

Cut your debt.

With monthly budgets getting tighter in line with rising interest rates, cutting back on debt is more important than ever. If you’re worried about debt or going into debt following the announcements, you’re not alone. Many people are in the same position as you, and help is out there.

Build up credit score.

For those of us choosing to remortgage, having a good credit score is key. The better your score, the more competitive the deals you’ll have access to. For advice on getting a mortgage with a low credit score, read our dedicated blog.

Overpay your mortgage.

Finally, if you have the budget for it and the terms of your current deal allow it, it’s a good idea to overpay on your mortgage while your rates are low. Make the most of the opportunity because once the interest rates rise does start affecting you, it might be more difficult to do this.

Navigate increasing mortgage rates with help from our experienced team.

When the Bank Says No is a team of professional mortgage brokers with a stellar track record of helping non-standard applicants achieve highly competitive mortgage deals. Whatever your personal and financial situation, we’re here to help you navigate the rising interest rates and find a good deal – whatever’s happening.

Talk to us today and start your journey to a better mortgage >

 

Emma Jones

Emma began her career in Lloyds Banking Group, first in the unsecured loans department at HSBC and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the the banks let their customers down by denying loans and mortgages.

Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money.

Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.

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