The Bank of England raised interest rates by 0.5% today from 1.25% to 1.75% – the biggest increase in 27 years. But what does this mean for your mortgage? Let’s take a look.
— Bank of England (@bankofengland) August 4, 2022
If you’re on a tracker mortgage, you’ll most likely see an immediate increase in your monthly repayment, but if you’re on a variable rate it’s up to the lender. According to UK Finance, about 21% of households are on a variable rate – either a tracker mortgage, where the rate you pay is directly linked to the Bank base rate or their lender’s standard variable rate (SVT).
After today’s rate rise to 1.75%, those on a variable or tracker could see their payments jump hundreds of pounds a year. If you’re on this type of mortgage, it’s worth speaking to an advisor to see if you can switch to a more competitive fixed-rate to try and reduce these costs.
If you’re on a fixed rate deal, you don’t have to worry about interest rates until it’s time to remortgage. In total, approximately 1.3m fixed-rate deals are due to end during 2022, though this does include a number that have expired since January.
If your fixed-rate deal is due to end this year or early next year, you might want to consider remortgaging to a new deal with a longer fixed term before the next rate rise. Economists predict that interest rates could rise above 2% in the next year, so fixing your payments now will protect you against the stress of a further rate rise.
For those who have over 6 months left on their current deal, but want to switch to a new rate and lock in a longer-term, just watch out for Early Repayment Charges. These charges are set by your lender and could cost you thousands if you’re not careful. In some circumstances, it could be worth exiting your current deal, taking the hit on your ERCs, and locking in a lower-rate long-term fixed deal now. If this is an option you’d like to explore, our mortgage experts can help you weigh up your options.
If you’ve been affected by the recent rate rise, or want to have certainty over your future mortgage payments, please do get in touch. Our team of qualified mortgage experts are here to help – whether you want to talk about your options or need support finding a better low fixed-rate deal.
To speak to our team or book a free initial mortgage consultation, please call 0161 443 4830, or click the button below.
*Your home may be repossessed if you do not keep up repayments on your mortgage.