Are interest rates rising?

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Today, we’re joined once again by Ifthi, a trained accountant, mortgage broker, and one of the founding directors here at WIS. He’s been in the industry for over 10 years.

Q1: Will the Bank of England increase the base rate?

Gemma: So, will the Bank of England increase the base rate?

Ifthi:

The Bank of England base rate is the rate at which banks borrow from the central bank.

It is decided by a committee of about eight people, not by one individual or the Chancellor.

Inflation is rising, banks have already increased their interest rates, and historically the government uses the base rate to control inflation.

There is a chance the rate may go up, but ultimately, the decision lies with the committee.

Q2: Do you think the base rate will rise in the future?

Ifthi:

The base rate is currently 0.1%, the lowest ever recorded. Before the pandemic, it was 0.75%.

Inflation, fuel prices, house prices, and supermarket costs have all risen.

The Bank of England may use the base rate to bring inflation down.

Therefore, it’s likely we may see an increase in the future.

Q3: Will mortgage interest rates rise too?

Ifthi:

The base rate influences mortgage rates, but they are also affected by other factors like swap rates, government borrowing, and demand/supply.

Many high street lenders have already increased mortgage rates proactively in anticipation.

Typically, when one or two big lenders raise rates, others quickly follow.

Q4: Who will be affected the most if mortgage rates rise?

Ifthi:

First-time buyers: They are often on a budget. A higher rate reduces affordability (e.g., a £1,000 monthly payment could rise to £1,100).

Borrowers on variable rates:

• Standard Variable Rates (SVRs)
• Tracker mortgages
• Discount mortgages

These products are directly impacted when the base rate increases.

Q5: What if someone is on an SVR but had a bad financial year (e.g., due to COVID)?

Gemma: Some people on SVRs are worried they can’t switch to a better deal because they’ve had a difficult financial year. What would you say to them?

Ifthi:

While some lenders may say no, not all lenders will.

Certain lenders may ignore the COVID period and look at earlier years.

Sometimes a deal can be worked out with the same lender.

Don’t lose hope—speak to an advisor. There are usually options available.

Q6: What measures can people take if interest rates rise?

Ifthi:

If rates rise, those on trackers or variable rates are most vulnerable.

Fixed-rate mortgages provide stability—you’ll know exactly what you’re paying for 2, 5, or more years.

SVRs and trackers usually don’t have early repayment charges, so switching may be possible without penalties.

Always check your contract and speak to an advisor before making changes.

Q7: Should borrowers consider long-term fixed rates (e.g., 10 years)?

Ifthi:

Fixing gives stability, but the term length depends on personal circumstances.

A 10-year fix might not suit everyone because of early repayment charges if you want to move or change lenders.

A shorter fix (2–5 years) may be better if you expect changes in your circumstances.

Key point: If rates are rising, variable products may not be the best option.

Q8: Any final advice on interest rates?

Ifthi:

We cannot expect the base rate to stay at 0.1% forever—it’s more likely to rise than fall.

Now is a good time to review your finances, especially if you’re on a variable rate.

Annual reviews with an advisor can help you stay prepared.

Fixed deals aren’t always the best long-term option, so tailor your choice to your circumstances.

Disclaimer

The Bank of England base rate and interest rates depend on many factors and committee decisions, not personal predictions.

Mortgages are secured against your home. Your home may be repossessed if you do not keep up with repayments.

These points may not apply to everyone. If unsure, seek advice from a qualified advisor.

Gemma: Thanks again, Ifthi, for your advice. We’ll be back next week with another episode of Let’s Talk Money and Mortgages. Stay safe and see you soon!