Beat the Big Squeeze! What interest rate rises mean for your mortgage

Beat the Big Squeeze! What interest rate rises mean for your mortgage, where to get expert help and how to take the next step on the property ladder

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The Bank of England’s decision to raise interest rates amid rising inflation, combined with disruption on global financial markets, has led to an impact on mortgages. 

Lenders set rates according to the cost of mortgage market pricing, which has recently increased. 

With some household budgets already under strain, you may have questions about your mortgage or be wondering how recent developments could impact you. 

Current changes in the mortgage market may affect people with mortgages and those looking to join the property ladder  

With our ‘Beat the Big Squeeze’ series, brought to you in partnership with Halifax, we’ve been bringing you useful, practical advice on how to deal with the cost of living crisis. 

So far, we’ve provided an overview of the crisis, taken a deep dive into the issue of rising energy bills, and shown where you can go for help with money worries. 

This week, we examine what’s behind rising interest rates and what they could mean for your mortgage.  

We’ll also look at some of the key questions you may have about your mortgage and where you can go for expert help. 

Finally, we’ll also examine what support is available for people planning to buy. 

More articles will be published as part of the Beat the Big Squeeze series in the coming weeks, so keep an eye out to make sure you never miss one. 

Why are mortgage rates rising?  

Inflation is currently running at about 10 per cent, according to the Office of National Statistics.

One of the main reasons for high inflation is soaring energy costs, including a rise in the price of gas and crude oil.

When inflation rises, interest rates tend to rise too.

Lenders set rates according to the cost of mortgage market pricing, which has recently increased

In turn, this increases the cost of mortgage market pricing, which can cause the price of some customer deals to also climb. 

Although the backdrop remains uncertain, more volatility is expected in the coming months. 

How could my mortgage be affected? 

In recent months, many banks and lenders have been changing their mortgage ranges – leaving some people wondering whether their existing mortgage offers could be withdrawn.

However, if you’ve already completed your mortgage application and received a formal mortgage offer, it is rare for lenders to then withdraw the deal. 

If you have applied for a mortgage but not yet received your offer, your lender may try to honour the rate that you have applied for, subject to the application meeting lending criteria.

Changes to the mortgage market have also affected the monthly repayments paid by some borrowers.  

Whether you see an increase in your mortgage repayments depends on which type of mortgage you have. If you’re not sure, refer to your latest correspondence with your lender or contact them to ask. 

Those with tracker mortgages see payments rise almost immediately when the Bank of England base rate goes up. 

People on variable rates are also likely to see increases. 

In recent months, many lenders have been changing their mortgage ranges – leaving some people wondering whether their existing mortgage offers could be withdrawn

Fortunately, the vast majority of borrowers are on fixed rate mortgages, where the interest rate stays the same for an agreed period of time.

These people will be sheltered from rises until the period comes to an end. 

If your fixed rate ends and you haven’t signed a new mortgage agreement, most lenders will automatically move you to a standard variable rate.

If you choose to switch to a new deal before your current one has expired it’s worth checking if you have to pay any fees, such as an Early Repayment Charge (ERC).

Where can I go for help? 

While we’ve already looked at some of the questions people often ask about mortgages, you may have more.

If this applies to you, Citizens Advice has a handy section on managing your mortgage.

You’ll find lots of useful advice, as well as ways to cope with an increase in your mortgage payments. 

If you’re already struggling to pay your mortgage or have got behind with your repayments, it’s important to get help to stop you falling further behind. 

Firstly, it’s always best to contact your bank or lender. 

If you’re in debt and need advice on getting back on track, the charities StepChange and National Debt Line provide help online or by phone.

For anyone struggling with mortgage repayments, it’s always best to contact your bank or lender

Money worries can sometimes affect your mental health.

For free support, you can visit the Mental Health & Money Advice website for a list of organisations which could help.

If people have questions about their mortgages, they should speak to their lender.

Many lenders have provided support online, such as Halifax, whose customers can find answers to some of the most common mortgage questions on their website.

If you’re a Halifax customer and need support, you can chat to one of their mortgage experts in a branch, over the phone or via video call (for more information click here).

Halifax customers can also visit the Money Worries of their website for more advice about where you can seek support if you’re in financial difficulty. 

And what if I’m thinking of buying? 

If you’re considering taking out a mortgage on a property and want more information on how the process works, the Money Helper website is a good place to start. 

You may be able to get help from the government to buy a home. For a list of schemes that are available, click here.  

For more useful tools and support, you can also visit the Halifax website’s dedicated mortgage page. 

Alternatively, you could try visiting a Halifax Home Hub. Found in selected branches, these are dedicated home buying spaces where you can drop in to chat to an experience Mortgage and Protection Adviser and colleagues. 

They can help guide you through the home buying process and put a plan in place to get you to the next step on the property ladder. More information can be found here. 

Customers who do not live near a Home Hub can pop into their local branch or speak to a Halifax adviser over phone or video.  

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