What you need to do with your mortgage when interest rates increase
When inflation increases, the Bank of England often raises interest rates in response. This move is intended to discourage borrowing and spending, which in turn reduces inflation over time.
However, it can take a while for inflation to return to normal, meaning there may be a succession of interest rate rises, all of which can affect your mortgage.
So, what should you do?
1. Know your mortgage
There are several different types of mortgages and these will be affected differently by interest rate changes. Check your paperwork or speak to your mortgage provider to determine how you might be impacted.
Those on a fixed rate will not see their monthly payments increase, but variable rate mortgage-holders will have to pay more.
2. Make overpayments
If you’re on a fixed rate mortgage, rising interests rates won’t affect you – yet. If you can afford to pay more than your monthly payments, take advantage of your low rate while you can and pay in extra so that when it is time to find a new deal you won’t need to borrow as much.
3. Build your credit score
Interest rates might not affect you immediately, but they will when the time comes to find a new mortgage deal. If you’ll be looking for a new mortgage in the next 12-18 months, try to build up your credit score now so you can secure a better deal in the future.
4. Get expert advice
If your mortgage repayments are set to increase and you are worried about how to afford them, seek advice. You can speak to a free debt adviser even if you do not yet have any debts and they can help you to manage your finances.
5. Get the best deal
Most people go to the bank when they need a mortgage, but this is rarely the best deal on offer. A mortgage adviser will be better able to assess your needs and provide you with access to the entirety of the market.
We do this for free. We’ll help you to secure the best available mortgage on the market with absolutely no cost to you.
6. Plan ahead
Most lenders provide a six-month window between receiving your mortgage offer and completing on the mortgage. This means that the earlier you look, the more likely you are to secure a lower rate.
If a better mortgage comes up for you in the meantime, we’ll ensure that you secure it, but the later you leave it the less choice you’ll have.
We’re here to help you with fuss-free financial advice and support. For help on managing your mortgage, get in touch.