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How Interest Rate rises may affect your Mortgage

What mortgage deal you end up going for is going to largely depend on how high your interest rate is. Read on to find out more. 

The impact of interest rate rises will vary from person to person and what deal they’re on. However, it’s important for you to understand how fluctuating interest rates can affect the mortgage that you’re on or what one you go for. This article will help you understand what the best mortgage interest rates are for you! So, let’s find out a bit more.

The impact on homeowners:

While the impact of interest rate increases for people on fixed rates will be non-existent, this isn’t the same for all homeowners.  For the one third of UK homeowners who are estimated to have SVR rate (standard variable rate) mortgages, the impact of increasing interest rates can loom large. The same applies for those on Tracker mortgages.

What are risks if you have a variable / tracker rate mortgage?

Ok, let’s explain what a variable rate mortgage is. This an interest rate on a mortgage that is indexed against a benchmark. In our case, the benchmark in the UK is the Bank of England’s base rate. This essentially means that if the base rate increases then so will interest rates and vice versa. The main difference is that the Tracker mortgage tracks the Bank of England base rate exactly whereas the movements of the svr rate is set by each particular lender.

So, how will this affect your ability to get the best mortgage interest rates? Well, if you’re going for a SVR / Tracker mortgage then you should do your research and double check that there are no forecasted interested rates increases.

They have also predicted that rates are unlikely to exceed the 5% base rate that existed before the financial crash in 2008 with most predicting the base rate to eventually settle between 2 – 3%. Though, the problem with this for buyers is that with the interest rates currently at 0.75 %, if they were to increase to this predicted amount this could come as a burden to those on variable rate mortgages.

How should I deal with interest rate rises?

One way in which a lot of property buyers tend to deal with fluctuating interest rates is through fixed rate mortgages. The recent availability of 10-year fixed rate mortgages at rates which are only slightly higher than two, three or five year (initial rate for the mortgage term) fixed mortgages. Therefore, given how interest rates are predicted to increase over the coming years, a long-term fix looks to be a much more viable option for homeowners. Especially, those who are looking to remortgage or those at the start of the buying process. This can then be a great option for those who want to stabilise their financial outgoings before they move to a standard variable (SVR) rate mortgage.

At Mortgages Online we compare a multitude of deals from many different lenders, but we can also provide advice on fluctuating interest rates and the best way for you to combat them. If this sounds like an attractive proposition then check out some of the other articles on our website – we’ve got loads of info on everything mortgage related! Mortgages explained by the pros, so you can make sense of the mortgage market.

MO are completely free to use – no need for any credit card info with us. We search through different types of mortgages, comparing mortgages that are right for you. Based off of your personal information, we can find you the ideal mortgage for you.


Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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