Interest rate rise mortgage calculator: How much will it cost you?

By Liam On Nov 3, 2022

The Bank of England raises interest rates and this drives up mortgage rates. With our calculator you can calculate what this could cost you.

You can calculate how much extra you’d pay on your mortgage if your lender changes the rate you pay (or how much you’d save if rates fell).

The calculator allows you to use your current mortgage interest rate and see how different levels of rate hikes would increase interest and monthly payments.

Enter a number for the size of the rate increase, for example 0.25, 0.50. or 0.75, or a negative value (eg -0.25) for an interest rate cut.

> Check out the best live mortgage rates you can apply for with our mortgage finder

What will happen to the interest rates?

After more than a decade in the doldrums after the financial crisis, interest rates are rising rapidly.

The Bank of England’s key interest rate, officially known as the Bank Rate, has risen from 0.1 percent last December to 2.25 percent now and is expected to continue rising.

A decision is expected on November 3 at noon, when the Bank is expected to add another 0.75 percentage point to bring the base rate to 3 percent.

This comes as the Bank of England’s Monetary Policy Committee — the group of expert economists who vote on what the key interest rate should be — is trying to control inflation.

The idea is that by raising the base interest rate, it increases the cost of borrowing and reduces the demand for it from consumers, households and businesses, slowing the economy.

In theory, this should eventually reduce inflation, which is currently well above the Bank of England’s 2 percent target of 10.1 percent.

The Bank of England has been rapidly raising interest rates since late 2021, with the base rate – or bank rate – as it’s officially known rising from 0.1 percent to 2.25 percent

Base rate versus mortgage rate

When the Bank of England changes the base rate, some mortgage interest rates will change, but not all.

Fixed deals remain at the same level until they expire, base rate trackers will move by the same amount as the bank’s shift, and standard variable rates or other deals associated with them will move by an amount determined by the lender .

The cost of fixed-rate mortgages has risen significantly over the past year, driven by the Bank of England’s rate hike and exacerbated by the fallout from the poorly received mini-Budget from Liz Truss and Kwasi Kwarteng.

Debt-funded tax cuts in this – now reversed – triggered financial turmoil, government borrowing costs rose, a vicious circle of pension fund bond sales and expectations rates should rise more.

Government borrowing costs, as measured by government bond yields, have since fallen to pre-mini-budget levels following a Bank of England intervention, before Kwarteng and then Truss resigned and Jeremy Hunt took over from the position. from Chancellor and Rishi Sunak as Prime Minister, but fixed mortgage rates remain high.

The two-year average rate is currently 6.47 percent and the five-year average rate is 6.32 percent. In November 2021, the averages were 2.29 percent and 2.59 percent, respectively.

What to do if you need a mortgage?

Borrowers who need to find a mortgage because their current fixed-rate deal is expiring, or because they have agreed to a home purchase, have been urged to act, but not to panic.

Banks and mortgage banks are still lending and mortgages are still being offered and applications are being accepted.

However, rates change quickly and there is no guarantee that deals will last and not be replaced by higher rate mortgages.

This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value

What if I have to transfer?

Borrowers should compare rates and speak to a mortgage broker and be willing to trade to get a rate.

Anyone with a fixed-rate deal that expires in the next six to nine months should research how much it would cost to re-mortgage now — and consider taking on a new deal.

With most mortgage agreements, costs can be added to the loan and they are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I buy a house?

Those with a home purchase should also aim to get rates as soon as possible so that they know exactly what their monthly payments will be.

Home buyers should be careful not to overextend themselves and be prepared for the possibility that house prices could fall from their current high levels as higher mortgage rates limit people’s borrowing capacity.

Compare mortgage costs?

The best way to compare mortgage costs and find the right deal for you is to talk to a good real estate agent.

You can use our best mortgage interest calculator to display deals that fit your home value, mortgage size, term and fixed interest needs.

However, keep in mind that rates can change quickly, so the advice is that if you need a mortgage to compare rates and then talk to a broker as soon as possible, they can help you find the right mortgage for you. .

> Check out the best fixed rate mortgages you can apply for

Latest news about interest rates and mortgages

Read our regularly updated guide for more information: What’s next with mortgage interest and should you fix it?

In our Mortgages & Home section you will also find all our latest articles on mortgage interest rates.

Savers benefit from higher rates – view the best savings rates in our independent tables.

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