The Bank of England raised interest rates by 0.5% today from 4.5% to 5%, marking the 13th successive increase since December 2021.
The increase put interest rates at their highest level since the 2008 financial crisis, as the Bank continues to fight inflation.
— Bank of England (@bankofengland) June 22, 2023
Although data suggested that higher interest rates would be on their way, many are still unsure how the rate rise will affect them directly.
If this is you, and you’re wondering how the rate rise will affect your mortgage, we’re here to help.
If you’re one of the estimated 15% of mortgage holders on a tracker or variable mortgage, you’ll see a fairly immediate increase in your monthly repayments.
This is because tracker mortgages are normally set against the Bank’s interest rate, plus a percentage.
After today’s rate rise to 5%, those on a variable or tracker could see their payments jump hundreds of pounds a year.
So, 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 mortgage, the good news is that your payments won’t change, at least until the end of your current deal.
Figures shared with the Guardian by UK Finance, the banking industry trade body, show more than 2.4m fixed-rate homeowner deals will expire between now and the end of 2024.
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.
MoneyWeek says some analysts believe rates could rise to 5.75% by the end of 2023, 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 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.