How Interest Rate Changes Affect Your Mortgage in 2024

Damon Chavez
Oct 17, 2024
3 min read

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How Do Interest Rate Changes Impact Your Mortgage?

Interest rate changes can significantly impact your mortgage payments, especially if you have a variable or tracker rate. Rising rates mean higher monthly payments while falling rates can reduce your costs temporarily. For homeowners with fixed-rate mortgages, the effect is deferred until the end of the fixed term. Speak to an adviser at Three Keys Mortgages to determine how to safeguard your mortgage against future rate hikes.

What You Need to Know

Current Bank of England Base Rate: The base rate is currently 5% (as of September 2024). The Bank of England’s base rate directly influences mortgage rates, affecting monthly pay. Your payments will fluctuate accordingly if you have a variable or tracker mortgage, Learn more about the current base rate and its impact.
Impact on Fixed-Rate Mortgages: If you’re on a fixed-rate mortgage, your payments will remain stable until your fixed period ends. However, when your term ends, be prepared
for a potential increase if current rates are higher than your initial rate.
Impact on Variable/Tracker Mortgages: Based on base rate changes, payments will increase or decrease. Even small shifts can lead to significant monthly differences.
What To Do Next: Speak to a Three Keys Mortgages adviser if you’re unsure how rate changes will impact your payments and want to explore remortgaging options.

Current Bank of England Base Rate

The Bank of England’s base rate is crucial for influencing mortgage rates. As of September 2024, the base rate is 5%. This rate impacts how much you pay each month if you have a variable or tracker mortgage.

Understanding the Base Rate: The base rate is the single most important interest rate in the UK, set by the Monetary Policy Committee (MPC). It plays a key role in maintaining inflation at the government's target of 2%. Changes to the base rate influence how much banks charge for loans and pay on savings, affecting overall economic activity.
Next Rate Decision: The next review of the base rate is scheduled for 7 November 2024.
Learn More About the Current Base Rate and Its Impact.

Fixed-Rate Mortgages and Rate Increases

Fixed-rate mortgages offer stability by locking in your interest rate for a predetermined period, usually 2 to 10 years. This means your monthly payments remain consistent until the end of your term.

When Your Fixed Term Ends: If market rates have risen, you may face higher payments when you switch to a new mortgage or revert to your lender's standard variable rate (SVR).
Example: If your initial fixed rate was 2% and the current market rate is 5%, be prepared for a significant increase in your monthly payment.

Variable/Tracker Mortgages and Payment Fluctuations

Variable-rate and tracker mortgages are sensitive to the Bank of England's base rate. As the base rate changes, so do your payments.

How Payments Change: If the base rate rises, your monthly payments will also increase, and vice versa. This can lead to fluctuations that make budgeting more challenging.
Example: A tracker mortgage set at 3% with the base rate increases will directly impact your payment amount.

What to Do if Rates Are Rising

If you anticipate rising rates, consider these actions to protect yourself:

Consult a Mortgage Adviser: Reach out to a Three Keys Mortgages adviser to discuss your options and find a mortgage product that suits your needs.
Review Your Current Mortgage: Evaluate whether it might be beneficial to switch to a fixed-rate mortgage to lock in lower rates.
Consider Overpaying: Making additional payments on your mortgage can help reduce the principal, lowering future interest payments.

How to Protect Yourself from Rising Interest Rates:

Overpay When Possible: Paying a little extra each month can reduce your overall loan balance, lowering your interest burden. Use our Overpayment and APR Calculator to see how much you can save.
Consider Shorter Fixed Terms: If you anticipate rates will drop soon, a 2-year fixed term might offer more flexibility than a 5-year deal.
Consult a Three Keys Mortgages Adviser: Our expert advisers can help you navigate complex rate environments and choose the best product for your situation.