The Bank of England is raising interest rates and this is driving up mortgage rates, our calculator allows you to work out what this could cost you.
You can calculate how much more you’d pay for your mortgage if your lender changes the rate you’re paying (or how much you’d save if rates went down).
The calculator allows you to use your current mortgage rate and see how different levels of rate increases would increase interest and monthly payments.
Enter a figure for the size of the rate increase, for example, 0.25, 0.50. or 0.75, or a negative value (eg -0.25) for a rate cut.
> Check the best live mortgage rates you could apply for with our mortgage finder
What is happening with interest rates?
After more than a decade of stagnation following the financial crisis, interest rates are rising rapidly.
The Bank of England’s base rate, officially known as the Bank Rate, rose from 0.1 percent last December to 3 percent now and is expected to continue rising.
The most recent increase came on Thursday, November 3, when the Bank’s rate regulators added another 0.75 percentage point to bring the base rate to 3 percent.
This occurs when the Bank of England’s Monetary Policy Committee, the group of expert economists who vote on what the base rate should be, seeks to try to control inflation.
The idea is that by increasing the base rate, you increase the cost of borrowing, and that reduces demand from consumers, households, and businesses, which slows the economy.
In theory, this should eventually bring inflation down, which is currently well above the Bank of England’s 2 percent target at 10.1 percent.
The Bank of England has dramatically raised interest rates since the hikes began in December 2021
Base Rate vs Mortgage Rates
When the Bank of England changes the base rate, some mortgage rates will move, but not all.
Fixed transactions will remain at the same level until finalized, base rate trackers will move by the same amount as the Bank’s turn, and standard variable rates or other transactions tied to them will move by an amount decided by the lender.
The cost of fixed-rate mortgages has risen substantially over the past year, driven by rising Bank of England rates and compounded by the fallout from Liz Truss and Kwasi Kwarteng’s ill-received mini-budget.
The debt-financed tax cuts in this, since being reversed, triggered financial turmoil, rising government borrowing costs, a vicious cycle of pension fund bond liquidation, and expectations that rates would have to rise further.
Government borrowing costs, as measured by gilt yields, have fallen back to pre-mini-budget levels after a Bank of England intervention, before Kwarteng and then Truss resigned and Jeremy Hunt took office as chancellor and Rishi Sunak as prime minister, but fixed mortgage rates remain high.
The average two-year fixed rate currently stands at 6.47% and the average five-year fixed rate at 6.32%. In November 2021, the averages were 2.29% and 2.59%, respectively.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic..
Banks and building societies continue to lend and mortgages are still being offered and applications accepted.
However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.
This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property
What if I need to re-mortgage?
Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.
Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.
What if I am buying a house?
Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.
Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.
How to Compare Mortgage Costs
The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.
You can use our best mortgage rate calculator to display offers that match your home value, mortgage size, term, and fixed rate needs.
Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .
> Consult the best fixed-rate mortgages that you could apply for
Latest news on interest rates and mortgages
Read our regularly updated guide to learn more: What’s Next for Mortgage Rates and Should You Fix It?
Our Mortgages & Home section also includes all of our latest articles on mortgage rates.
Savers benefit from higher rates – check out the best savings rates in our independent tables.
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