Mortgage rates have been getting a lot of attention in the UK lately, and for good reason. They affect a wide array of people, including not only those with a mortgage but also renters and first-time buyers. They’ve surged to levels we haven’t seen since the 2008 Financial Crisis and therefore the chances are that you or someone you know has felt the impact of these higher rates.

Why are Mortgage Rates Rising?

Mortgage rates and the Bank of England’s base rate go hand in hand. This base rate determines how expensive it is to borrow money so, when the base rate goes up, borrowing money becomes pricier, and that usually leads to higher mortgage costs. Now the Base Rate is the highest it has been in fifteen years, and this is causing mortgage lending rates to climb as well.

What Affect is This Having on People’s Costs?

While discussing percentages might sometimes feel a bit distant, let’s bring it closer to home by looking at the tangible impact these rates are having on your monthly budget. More than 4 million households have experienced a noticeable uptick in their monthly expenses. On average, when compared to March 2022, individuals are shelling out an extra £280 per month for their mortgages and it is worth noting that individuals who previously benefited from low-rate fixed mortgages are now potentially having to transition to much higher variable rates.

Insights from MPA’s Mortgage Adviser: Rob Chapman DipFA MLIBF

When asked about how clients are reacting to the current cost of mortgages, Rob comments: “Most clients are expecting their mortgages to be more, mainly due to what they have seen on TV and social media etc. They are surprised at just how much the increases are but in the main, people are able to absorb the increases.”

Unfortunately, as it’s not just mortgages that are increasing Rob has noticed that a common remark from clients is “this wouldn’t be so bad if it wasn’t for my gas and electricity increasing and my shopping bill going up each week!”

However, the more prepared you can be for mortgage increases, the better! Rob comments that ideally “clients need to contact their Adviser when they are within around 6 months of their current deal expiring. They should also be prepared for the increase and potentially look at methods to reduce the impact such as extending the term of the mortgage if possible or, in the worst cases consider reverting to an Interest Only deal, however only for a period.”

If you have any concerns or questions, please contact your Adviser or call the SWP office on 01905 339010.

(The statistics used in this article are from the (2023))