Will My Mortgage Go Up After the Latest Interest Rate Rise?

Only if you’re on a variable rate mortgage like a tracker or Standard Variable Rate (SVR). Your mortgage payments will increase following the Bank of England’s (BoE) latest base rate rise. 

Here’s a quick breakdown:

Tracker Mortgages 

With a tracker mortgage, your interest rate directly follows the Bank of England base rate, moving in lock-step both up and down. 

So any base rate increases get passed on immediately and in full by your lender. 

The recent 0.25% hike means the average tracker mortgage payment has gone up around £23.71 per month.

Standard Variable Rate (SVR) Mortgages

For those on an SVR mortgage, the rate change impact is less certain. 

Lenders don’t have to increase their SVR in line with the base rate, though they usually do make changes to SVRs following rate moves. 

On average, SVR mortgage payments have risen by an estimated £15.14 per month after this latest base rate hike.

Fixed-Rate Mortgage

If you’re currently on a fixed-rate mortgage deal, you can breathe a sigh of relief for the time being. 😮‍💨

Your interest rate is locked in for a fixed period, so the latest base rate rise won’t affect your mortgage costs. This will only change when you remortgage onto a new deal.

How Much More Will I Pay Each Month?

The exact amount your variable mortgage payment increases depends on:

  • Your current mortgage interest rate
  • Your outstanding mortgage balance
  • Whether you’re on a tracker or SVR deal

You can use the online mortgage calculator below to get a personalised estimate of your new monthly payment based on the latest rates and your mortgage details.

[Embedded Mortgage Calculator]

For example, say you have a £200,000 outstanding mortgage balance on a tracker deal. Your interest rate has just gone up from 4.75% to 5%. 

For this mortgage, your monthly payment would increase by around £29 (from £1,140 to £1,169).

On a £150,000 SVR mortgage, if your rate went from 6% to 6.25%, you’d see your payment rise by £23 per month (from £966 to £990).

So while the payment increase may seem small based on these examples, it can add up significantly over time – especially if interest rates continue rising throughout 2024.

Will Interest Rates Keep Rising in 2024?

Yes, many experts think the Bank of England will raise rates more this year to fight inflation.

The bank’s next interest rate decision is due on 20th June 2024, with financial markets pricing in another 0.25% increase to take the base rate to 5.5%. 

Some forecasters, like Capital Economics, expect rates to peak at around 5.25% in 2024. 

They also believe rates might go down later in the year and into 2025, possibly dropping to around 3% by the end of 2025 as prices settle. 

With rising rates, homeowners on variable rate deals could see their mortgage costs go up by hundreds of pounds each month compared to last year.

Should I Remortgage to a Fixed Rate to Avoid More Hikes?

Given the outlook for further rate rises in 2024, remortgaging to lock into a fixed-rate deal is an avenue many existing borrowers may want to consider, especially if:

  • You’re currently on an SVR mortgage
  • Your fixed-rate deal is ending in the next 6-12 months
  • You’re worried about your ability to afford higher variable payments

Today’s fixed mortgage rates reflect lender expectations for where the base rate will go from here. 

So while fixed deals are more expensive than just a year ago, they can give valuable payment certainty and protection from future rate rises.

A mortgage broker can analyse your current deal against today’s fixed rate offers to see if you could save money by remortgaging now versus riding out future base rate increases.

How Do Interest Rate Changes Affect First-Time Buyers?

Rising interest rates can make it harder for first-time buyers to afford a home. Higher rates mean higher monthly payments, which can strain a tight budget. 

If you’re a first-time buyer, securing the best mortgage deal is crucial. 

Start by comparing offers from different lenders. Locking in a fixed-rate mortgage early can protect you from future rate hikes. 

This way, you’ll know exactly what your payments will be each month, making it easier to plan your finances.

What If I Can’t Afford My Mortgage Payments After a Rate Rise?

For homeowners already stretched financially, a mortgage rate hike could make your home unaffordable.

If you’re struggling with higher mortgage payments, don’t bury your head in the sand. Contact your lender right away to discuss your options. This could include:

  • Taking a mortgage holiday (temporary break from payments)
  • Extending your mortgage term to lower the monthly amount
  • Exploring a more affordable remortgage product

Lenders usually prefer to find a solution that allows you to stay in your home and keep up with payments.

How Can I Manage Mortgage Payments on a Tight Budget?

Managing mortgage payments on a tight budget can be challenging, but it’s possible with careful planning. Here are some tips:

  1. Review Your Mortgage Deal – Regularly check if you’re on the best deal available. Switching to a more competitive rate can save you money.
  2. Overpay When Possible – If you receive a bonus or have extra funds, consider making a small overpayment. This can lower your overall debt and interest over time.
  3. Extend Your Mortgage Term – Talk to your lender about extending the term of your mortgage. This can lower your monthly payments, although it may increase the total amount you pay over the life of the loan.
  4. Consider an Offset Mortgage – An offset mortgage links your savings to your mortgage, reducing the amount of interest you pay. This can lower your monthly payments and save you money in the long run.
  5. Cut Unnecessary Expenses – Look for areas where you can cut back on spending. Redirect these savings towards your mortgage payments.
  6. Seek Professional Advice – Consult a mortgage advisor to explore all your options. They can help you find the best solutions based on your specific situation.

The Bottom Line: Don’t Wait to Weigh Your Mortgage Options

If you’re worried about rising mortgage costs, it’s crucial to act now. Whether you consider remortgaging to a fixed rate, downsizing, or requesting short-term payment relief, being proactive is key. 

Speak to an independent mortgage broker to understand all your options and scenarios based on your situation. 

The sooner you act, the more solutions you will have to protect your finances and home.

Need a broker? Get in touch. We’ll connect you with a qualified mortgage broker to guide you through the next steps of your mortgage.