It looks as though the day many of us have been dreading is fast approaching. Yes, there are signs that interest rates are going to rise sooner rather than later – a move that will leave a large swathe of the population wondering ‘what happens to my mortgage if interest rates go up?’.
So, unless you’re fortunate enough to have paid off your mortgage – and if you are then it’s likely that you’ve been waiting patiently for interest rates to rise so you can start making real money on your savings – then the following may be useful.
1. When will interest rates go up – and how much will they go up by?
We don’t know. In fact, nobody knows – not even the Bank of England (well they might have an inkling). However, at the end of September, the Governor of the Bank of England, Andrew Bailey, stated, as the UK heads for inflation above 4%, that a rise in 2022 is looking likely.
2. What happens to my mortgage when interest rates go up?
This one we can answer. Essentially, if you’re on a fixed rate mortgage, then nothing will happen. You’ll simply continue to pay the monthly mortgage payments that you signed up to at the start of the term. How long this will happen for depends on the length of your fixed rate mortgage term. If you’re on a tracker mortgage or a standard variable rate mortgage, then you should be prepared for your mortgage to increase by the same amount as the interest rate rise. Depending on the total amount you’ve borrowed, this could be a significant amount.
3. What can I do to offset an interest rate rise?
The best way to combat an interest rate rise is to apply for a fixed rate mortgage. Whether it’s a two-year fixed rate mortgage, a five-year fixed rate mortgage or even a 10-year fixed rate mortgage, these types of mortgages mean that you can establish the monthly mortgage repayments for a defined period of time. And, if interest rates continue to rise during the period that you’re on a fixed rate mortgage, you won’t be affected at all.
4. Will it be harder to get a good mortgage deal if interest rates rise?
Possibly, yes. But it hasn’t happened yet, and there are plenty of great mortgage deals still available. If you’ve been thinking ‘I need a new mortgage’ but have been putting it off, then talk of an impending interest rate rise should provide enough of an impetus for you to take action.
Equally, even if you’ve recently changed mortgage but are now concerned that it might not meet your needs if rates do increase, then it’s still worth contacting a mortgage broker, who should be able to explore a series of available options to you.
As a Guildford mortgage broker that’s witnessed many interest rate rises over the years, we know how they can impact mortgage availability and, more to the point, cause people to rush to get the best mortgage deal available before they are either pulled or amended to reflect the increase.
We recommend exploring your options now, whilst an interest rate rise is merely a possibility, and whilst there isn’t a backlog of people applying for a mortgage at once.
Get in touch with our team of expert Guildford mortgage advisers to find out how we can help you access some of the best mortgage deals in the UK right now. You can reach us on 01483 238280 or firstname.lastname@example.org.