Based on a mortgage of £125,000 at 50% LTV
Published 06 July 2022
The Bank of England sets the base rate for the UK and usually it’s reviewed each month. Although banks don’t need to follow the base rate, it does tend to be reflected in mortgage interest rates, typically from the month following any change.
As a rule of thumb, when the base rate is higher, interest rates on mortgages tend to be higher and when the base rate is lower, mortgage interest rates are also often lower.
When the base rate changes, the impact you’ll see depends on what type of mortgage you have. Tracker rate mortgages are usually linked to the Bank of England base rate - so your mortgage payments will drop in line with the base rate if it reduces. If the base rate rises, you’ll see a corresponding increase in your mortgage repayments. If you choose this type of mortgage, you should be sure that you have the flexibility in your monthly income to account for fluctuations in your mortgage repayments.
If you’re on a discount or standard variable rate mortgage, it’s likely that when the base rate rises, you’ll see an increase in your mortgage payments too, but the specific amount is determined by your lender. The same applies if base rate decreases. Our interest only mortgage repayment calculator can give you a good idea of how much additional interest you might have to pay, but you should speak to your lender to confirm this.
For those on fixed rate mortgages, you’re only likely to see a change in your payments once you reach the end of your current deal. If rates have gone up whilst you’re tied into a mortgage deal, you may find that it’s more expensive to remortgage to a new rate.
Once you’ve used our mortgage interest rates calculator, check your outgoings to see if there are any savings you could make. If you are concerned, it’s really important to contact your existing lender as soon as possible and they will support and set out the options available to you.
The other sensible option is to look at whether you’re on the best deal for your circumstances. If your current deal is about to come to an end, start looking at your options for switching to ensure you’re still on the best rate. Your current mortgage is likely to switch you to a standard variable rate when you come to the end of your current deal, which could be significantly higher than the best rates available on the market. Get in touch with our expert team at L&C who can help you to navigate the deals on offer and find the best one for your situation.
Even if your mortgage deal isn’t due to expire, it’s still worth looking at whether remortgaging could be the right option for you. It’s likely that you’ll have to pay early repayment charges (ERCs) to exit your deal early, but it may still be more cost-effective to switch, depending on how much your repayments are due to go up by and what rates are currently available.
When the Bank of England puts its base rate up, it generally makes borrowing more expensive. For most homeowners, that will mean your mortgage becomes more expensive - but whether you immediately feel the impact depends on the type of mortgage you have. If you’ve got a fixed rate mortgage, you won’t see any changes until the end of your fixed rate deal, whilst if you have a variable rate mortgage, you will see your monthly payments rise.
Your lender will confirm whether an increase in interest rates will have an impact on your mortgage, and what your new monthly payments will cost, typically with 14 days notice.
There are thousands of mortgage deals available at any one time, so the current interest rate will depend on lots of different things; for example the amount of deposit you have, whether it’s a buy to let mortgage, whether you want to fix your rate, pay any lender fees and so on.
The best way to see what rates are available to you today is to use our Online Mortgage Finder which will check which deals you’ll qualify for.
We've got lots of useful mortgage calculators to help you find out more about how much you can borrow, what it will cost, what fees will be involved and what else you should consider.