How Much Will My Mortgage Go Up Following The Latest Interest Rate Change?

In the wake of recent Bank of England’s base rate increases, many homeowners are left pondering the impact on their mortgage payments. This article aims to lay out the consequences of the rate hike for various mortgage types, including standard variable rate and tracker mortgages and offers strategic advice for those considering a remortgage in the current economic landscape.

With the UK facing rising living costs and fluctuating mortgage rates, understanding your options and the potential financial implications has never been more crucial. Whether you’re assessing the need to switch to a fixed-rate mortgage or simply calculating the new costs, this guide provides useful insights to help you through the evolving mortgage market.

Do the interest rate increases mean my mortgage will go up?

If you have a standard variable or tracker mortgage then yes. With a tracker mortgage, your interest rate directly tracks the Bank of England base rate, so the increase will be immediate and in line with any jumps or decreases.

It is estimated that monthly payments on the average tracker mortgage are up by £23.71 following the latest base rate hike.

If you have a standard variable rate mortgage then it’s less predictable as it’s up to your lender. The most likely outcome is that they will choose to increase their rates, but it could be by slightly more or less than the base rate jump.

On average, the typical monthly payment on a standard variable rate mortgage is estimated to have risen by £15.14.

Fixed-rate mortgages

It’s good news though if you’re already on a fixed-rate mortgage, as your interest rate is set for a specific term. So the interest rate increase won’t immediately impact your monthly repayments.

Some experts are predicting that new mortgage products are unlikely to see a rise in interest rates following the recent base rate shift. This is because these increases were forecast in advance and already factored into many lenders’ product ranges.

It’s still worth keeping an eye on rates though, as when your fixed term ends you’ll need to be prepared for a potentially big leap in your repayments if rates have increased significantly since you secured this particular offer.

How much will my mortgage payments be?

If you’re on a variable rate mortgage, you can use our mortgage difference calculator below to compare your current interest rate to the new one you will be moved onto following the base rate change.

You can also use our calculator above to compare the rates on two different deals if you are applying for a new fixed-rate mortgage or remortgage.

When will interest rates go up again?

The Bank of England reviews interest rates eight times a year, roughly every six weeks, and the next interest rate decision is due on 9 May 2024. It’s the Bank of England’s responsibility to try to keep inflation at around 2%, and with the cost of living crisis continuing to put pressure on the economy, the latest rise was expected, though the percentage point it was raised by was less than some had previously forecast.

Although nothing is certain, financial markets predict interest rates will be cut in June 2024, with Capital Economics predicting the rate to drop to around 4% to 3% in 2025. Generally, should interest rates fall, the forecast for mortgage rates will also fall.

Should you remortgage now?

This very much depends on your current deal. With the base rate today at 5.25% there might well be savings to be made by remortgaging to a better deal now.

If you have a fixed-rate mortgage due to end in the next six months for example, it may be worth getting your new deal set up now rather than waiting until it ends. If you have a standard variable or tracker mortgage and are worried about hikes over the next few years remortgaging now to a fixed-rate mortgage could be one way to lock in repayments and at least know where you stand.

Your best plan is to get advice from a mortgage broker – they’ll be able to assess your tracker versus fixed-rate mortgage options, and help you find the best fixed-rate mortgage deals.