Interest rates – planning ahead
Budgeting for potential changes to your mortgage payment is an essential part of your financial planning. It’s important that you consider how you would cope if interest rates or your mortgage payment increased.
The effect a change in the Bank of England Base Rate will have on you depends on what type of mortgage you have:
If you have a tracker mortgage:
A tracker mortgage tracks the Bank of England Base Rate and therefore a change in Base Rate would directly affect you and your mortgage payment.
If you have a fixed rate mortgage:
If you have a fixed rate mortgage, the fixed rate will be guaranteed until the end of the promotional period, but the payments due after this point could increase or decrease.
If you have a Standard Variable Rate (SVR) mortgage:
A Standard Variable Rate (SVR) is a variable rate of interest set by the lender. Many mortgages change to this rate when the promotional period ends on a mortgage product.
If you have a discount rate mortgage:
A discount rate mortgage will give you a discount off either our Standard Variable Rate or a product linked to the Bank of England Base Rate. If either of these interest rates change, then your mortgage interest rate would change too.
You can find out what type of mortgage you have and when your promotional period will end (if applicable) from your customer hub or latest Annual Mortgage Statement.
We recommend that you regularly review your mortgage payments to ensure that you could cover any potential increases in the Bank of England Base Rate.
The example below illustrates the affect of a 0.5% rise in the current Bank of England Base Rate on a Base Rate Tracker mortgage. This is based on an Interest Only mortgage and is for illustrative purposes only.
|Current Bank of England Base Rate 0.1%||Bank of England Base Rate increases to 0.6%|
|Mortgage: £100,000 Interest only||Mortgage: £100,000 Interest only|
|Product Type: Base Rate Tracker||Product type: Base Rate Tracker|
|Current pay rate: 4.59%||New pay rate: 5.09%|
|Current monthly payment: £382.50||New monthly payment: £424.17|
- How much money is coming into your household
- How much money is going out
- How much can you afford to repay any debts you may have
If you’re having problems paying your mortgage, the worst thing you can do is ignore it. The sooner you get in touch, the easier it’ll be for us to try and find a solution together. Visit our Money Worries page to find out more about how we can help.
If you’d like to discuss any aspect of your mortgage further, please do not hesitate to contact us. You can call us on 0345 300 8000*. In order for us to assess your situation, we’ll ask for the income and expenditure form to be completed before you call.