Will rising interest rates affect your mortgage?

For the last year or so the mortgage market has been fairly turbulent, with rising interest rates and house prices, but what will rising interest rates mean for your mortgage? How can you protect yourself from increasing costs?

Here we explore how rising interest rates may affect you and how we can help advise you on the best action to take for your finances.

What’s the Situation?

Interest rates have been raised to 5% by the Bank of England in a bid to bring down inflation. This is putting more pressure on borrowers – particularly those on tracker mortgages, variable rates and those buying or remortgaging.

Any movement in the interest rate has an impact on the rate on which we can borrow not only on mortgages, but other forms of credit, such as loans and credit cards.

We can’t accurately predict what will happen in the future (we don’t have a crystal ball unfortunately) and whether interest rates will increase or decrease, but our expert team can help you to protect your finances.

How will rising interest rates affect my mortgage?

If you’re on a tracker mortgage (a mortgage which tracks the Bank of England rate) – your mortgage will always increase or decrease in line with any changes.

If you ‘re on a variable mortgage deal, the rate may be influenced by a rise in interest rate but this depends on the lender.

If you’re on a fixed-rate mortgage, you won’t see any change in your rate or monthly payments until your plan ends.

How can I protect my finances from rising interest rates?

We can make some general ideas, but to give you the best advice on an individual basis just give our friendly team a call to arrange Fee Free Consultation.

If you…

Are on a variable rate mortgage

The best way to protect yourself from rising rates is by moving to a fixed rate. In many cases this can be the ‘sensible’ option as you can lock in a lower rate for two, three or even five years. Always tread carefully before making any move to check what fees might apply as a result of the move, our team will be able to help you more.

Are on a fixed rate mortgage

You already stand in good stead but it always pays to be prepared. If you’ve got less than six months to run, you can secure a new mortgage deal now in advance. If you don’t switch and your deal ends, you’ll automatically go on to the Standard Mortgage Rate.

Are on a tracker mortgage

In most cases, if you have a higher financial capacity to cope with higher repayments and are comfortable with the risks, then a tracker mortgage can work for you. However, if you’re struggling to keep up with the increasing costs, it might be worth looking at moving to a fixed rate mortgage as you repayments will remain constant for a fixed period.

Are a first time buyer

One of the best things you can do is save up as much towards your cash deposit as possible, which will mean you need to borrow less on a mortgage, with a lower loan-to-value ration. This essentially means you’ll be able to access better rates.

Are thinking of remortgaging

There’s no hiding that remortgaging in the current climate is a tricky decision, but our expert team can help you to find the best deals available to you and look at your financial future.

How do I choose the right option?

Given the impact this could have on your finances it’s wise to explore and consider all options. Everyone’s situation is unique and our team can help you to find the right product for you.

A member of the Mortgage and Finance Arena team will consider your personal circumstances, including current and future affordability, and recommend the most appropriate deal for your financial goals.

So, if your mortgage term is coming to an end, thinking about mortgaging or looking at switching mortgages our team can help you. Get in touch with our team to get a handle on your finances…