As the Bank of England’s (BoE) base rates rise for the eighth time since last December, homeowners and the UK housing market is affected by rising mortgage rates.
With inflation still above target, the BoE has been taking more steps to maintain stability. Increasing interest rates is one of them.
After the last rise in the BoE’s base rate, from 1.75% to 2.25%, the Bank of England has now increased rates to 3%. On their own, these numbers may not seem significant, however, it is having an effect on lenders and mortgage providers, with some homeowners seeing their monthly payments rise.
Although these rises are being used to prevent inflation there will be short term knock-on effects.
Today, we talk about one of the most crucial effects of increasing interest rates—rising mortgage rates, their impact on homeowners and what you can do to make the best out of this situation.
What Does the New Interest Rate Mean for Mortgages?
Although the latest rates affect all kinds of loans and debt, the most widely affected group are homeowners with tracker, standard variable rates and variable mortgages.
If you have a fixed-rate mortgage, however, for the time being your rates will be unaffected.
If you’re a homeowner not on a fixed-rate mortgage, with interest rates expected to continue rising, it may be worthwhile exploring if you can move onto a fixed rate.
Whilst it’s fair to expect your mortgage payments to increase in the coming years, regardless of your mortgage type, we’ve put together some steps that can help you manage your mortgage better.
Let’s take a look at what they are.
5 Simple Steps to Manage Money During a Mortgage Rate Rise
1. Learn About Your Mortgage and How it Will Change
The first thing you need to do as a homeowner is learn which type of mortgage you have—which you may already know. However, if you don’t, we suggest getting in touch with your provider and learning what mortgage deal you currently have.
Once you know this, you can get a pretty good idea of how a shift in the BoE’s interest rate will affect your monthly repayments, and research your options, accordingly.
2. Create a Budget to Prep for Any Increased Costs
Once you know how much money you will need every month to be able to afford any changes in your mortgage repayments, you need to create a budget.
Creating and living on a budget can be a very simple task if you stick to your plan. Slightly lowering your expenses and finding cheaper alternatives along with a few passive income sources can all really help you in these trying times.
3. Work on Your Credit Score
Now, as one of the leading lenders who provide fair and affordable loans to employed individuals, regardless of their credit scores, we don’t take credit scores into account.
However, your mortgage provider almost certainly considers your credit score as a key contributor to your affordability assessment. That’s why improving your credit score is likely one of the most influential things you can do to help you get a better deal on your mortgage.
4. Get in Touch With a Mortgage Broker to Get the Best Mortgage
As you work on building your credit score, usually the best way of saving money on your mortgage is to speak to a mortgage broker.
Experts in all things mortgage, they’re usually incentivised to get you the best possible rate on your mortgage. Even if you don’t end up using them, it’s worthwhile speaking to one, in order to get more information.
If your current deal is coming to an end, a mortgage broker can help you get the best mortgage possible, allowing you to save more than you would otherwise.
5. Overpay on Your Mortgage
If you’re currently on a fixed-rate mortgage, now may be a good time to start overpaying on your mortgage, if you can. This is a great way to save a little extra money, allowing you to get ahead on any future interest rate rises.
While there is often a limit to how much you can overpay on your mortgage, if you can afford to, try to pay as much as you can at the current rate to save money.
Also, before you make a payment, we suggest that you get in touch with your mortgage provider to ensure that there aren’t any extra charges for overpaying.
Choose Salad Money for Fair and Affordable Personal Loans
If you’re a homeowner with a mortgage, the rise in interest rates is almost certainly going to affect you. With more knowledge, it’s time to take a good hard look at your financial situation.
However, in these trying times, if you find yourself in need of some extra money, you can rest assured that Salad Money is here to help.
Our ‘More Than Your Score’ loans are specially designed to provide employees with fair and affordable personal loans despite a low credit score.
At Salad Money, we understand that the traditional credit score system has wronged many and can’t be completely trusted to assess your creditworthiness.
That’s why we assess your affordability with our unique open banking-based assessment, which helps us make sure that you get what you need.