How will interest rates affect your mortgage?
The Bank of England (BoE) base rate, which currently sits at 4.75%, is the key interest rate in the UK and is important as it influences many other interest rates in the UK, most notably interest rates on savings and mortgages. When the BoE changes the base rate it has significant implications for the UK mortgage market. A rise in interest rates will inevitably result in an equivalent increase in monthly mortgage payments for customers with variable-rate mortgages or tracker mortgages. In time, even fixed-rate mortgage customers will see their mortgage payments change, once their fixed-rate period comes to an end.
Mortgage interest rate calculator
The calculator below will help you to quickly calculate your mortgage repayments if there is a change in your mortgage interest rate:
What will happen if interest rates rise or fall?
Enter the values below to calculate how your mortgage payments will change if rates rise or fall
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Step 1 - How to use our free mortgage calculator
To get started enter the original details of your mortgage and then enter the interest rate increase or decrease.
If you are on a variable rate or tracker mortgage:
- Enter the original mortgage loan amount borrowed when you took out your current mortgage (i.e £200,000)
- Select whether your mortgage type is repayment or interest-only
- Enter the number of years remaining on your mortgage (the term) when you took out your existing mortgage
- Enter the current mortgage rate that you are paying, in the box titled “current rate” (i.e. 2%)
- Input the increase in the interest rate you want to use. For example, if you want to see how a rise of 1% in the mortgage rate (i.e from 2% to 3%) would affect your repayments enter “1” in the box titled “Change”. If you want to see the impact of a drop in interest rates, then enter a negative number.
- Click “Calculate”
Your results - The calculator will tell you the impact on your monthly mortgage payments. Just make sure that the “Current payment" matches your existing monthly mortgage payments.
If you are on a fixed-rate mortgage:
If you have a fixed-rate mortgage your mortgage repayments won’t immediately change when there is a change in the Bank of England base rate. However, when you come to remortgage at the end of your fixed-rate period the new interest rate you secure is likely to be different. To see the potential change in your monthly mortgage payments when you come off your fixed-rate mortgage deal follow these steps:
- Enter the original mortgage loan amount borrowed when you took out your current mortgage (i.e £200,000)
- Select whether your mortgage type is repayment or interest-only
- Enter the number of years remaining on your mortgage (the term) when you took out your existing mortgage
- Enter the current mortgage rate that you are paying in the box titled “current rate” (i.e. 2%)
- In the “Change” box enter the difference between the Bank of England base rate, for example, at the time you took out your current fixed-rate mortgage and what the interest rate is predicted to be in the future when you need to remortgage. The chart in our article on remortgaging shows the latest market prediction of where the Bank of England base rate will be over the next five years. If we assume that the BoE base rate at the time you took out your mortgage was 2% and that the market anticipates the base rate will be at 4.70%, when you need to remortgage, you would set the “Change” field as 2.7% (4.7% - 2%).
- Click “Calculate”
Your results - The calculator will give you a good estimate of your potential new monthly mortgage payments, given changes in mortgage rates. Just make sure that the “Current payment “matches your existing monthly mortgage payment.
Step 2 – Get a free mortgage review
The Bank of England’s base rate is currently 5.00% and market predictions are that mortgage rates could fall below 5.00% by November 2024. So if you currently have a variable-rate mortgage or are coming to the end of your fixed-rate mortgage in the next 6 months I would strongly recommend you speak to a qualified mortgage adviser as soon as possible to lock in the best fixed-rate mortgage deal.
If you don’t already have a mortgage adviser then you can get a free mortgage review* from a vetted FCA-regulated mortgage adviser:
- Visit the link above
- Complete simple questions about your situation
- Enter your contact details
- You will be matched with a reputable FCA-regulated mortgage adviser
The mortgage adviser will give you a free consultation with no obligation.
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