What's happening to interest rates?
With inflation rapidly rising, the Bank of England has increased interest rates in an attempt to slow it down - higher interest rates encourage saving so the rise in costs declines. The annual inflation rate hit 9.1% in May, the highest level for 40 years, and interest rates are predicted to continue to rise throughout 2022, with predictions that inflation will hit 11% by the autumn.
How does this impact my mortgage?
As interest rates rise, it becomes more expensive to borrow money. This means that your mortgage payments will rise, so over the course of your mortgage you will spend more. However, this is dependent on the type of mortgage you have.
With a tracker mortgage, mortgage rates rise in line with interest rates. With a variable rate mortgage, mortgage rates may be influenced by interest rates, but it is at the lender's discretion.
What can I do?
Choosing a fixed rate mortgage is the best way to protect yourself from increasing interest rates as your mortgage rate will be locked for a duration of your mortgage. If you are currently on a variable rate mortgage, you may want to consider moving to a fixed rate.
If you're unsure what's right for you, then you might want to reach out to an independent financial adviser for the best advice for your particular circumstances.
If you happen to be thinking of downsizing then now might be the right time to take that step, while property values remain favourable, before further interest rate rises.
If we can help you find a property better suited to your needs, please get in touch. We're here to help!