The Impact of Rising Interest Rates on Mortgages in 2023
The Bank of England has raised interest rates eight times in a row since December 2021, taking the base rate from 0.1% to 4.5%. This is the highest level of interest rates in the UK since 2009.
Rising interest rates are having a significant impact on mortgages. The cost of borrowing money is increasing, which means that monthly mortgage payments are going up. This is putting a strain on household budgets and making it more difficult for people to afford to buy a home.
Why is The Bank of England raising rates?
The Bank of England is raising the base rate in an attempt to bring down inflation. Inflation is at a 40-year high, and the Bank of England believes that raising interest rates will help to slow down the economy and bring inflation back under control.
When the Bank of England raises the base rate, it makes it more expensive for banks to borrow money from the Bank of England. This, in turn, makes it more expensive for banks to lend money to businesses and consumers. As a result, people and businesses borrow less money, which slows down the economy.
A slower economy means that there is less demand for goods and services, which puts downward pressure on prices. This, in turn, helps to bring inflation down.
The Bank of England is walking a tightrope. It needs to raise interest rates enough to bring down inflation to its targeted level of 2%, but it also needs to be careful not to raise interest rates so high that it damages the economy.
It is too early to say what the long-term impact of rising interest rates will be on the UK economy. However, it is clear that they are having a significant impact on borrowers right now.
Impact of The Bank of England rate hikes?
The impact of rising interest rates on mortgages is likely to be felt most by borrowers with variable-rate mortgages. These mortgages are linked to the Bank of England base rate, so when the base rate goes up, so do mortgage rates.
Borrowers with fixed-rate mortgages will also be affected by rising interest rates but to a lesser extent. This is because the interest rate on their mortgage is fixed for a set period of time, so they will not see their monthly payments go up until their fixed rate period ends. With record-low rates being available a few years ago a large number of people are expected to come off their deal in 2023 and be met with sustainably higher rates being available.
The impact of rising interest rates on mortgages is likely to be felt most by borrowers with low incomes. This is because these borrowers are more likely to be struggling to afford their mortgage payments as it is. Rising interest rates will make it even more difficult for these borrowers to make their monthly payments, and could lead to some borrowers falling into mortgage arrears.
If you are a borrower with a mortgage, it is important to be aware of the impact of rising interest rates. You should make sure that you can afford your monthly mortgage payments.
You should also make sure that you have a good understanding of your mortgage and your financial situation. This will help you to make informed decisions about your mortgage and your finances.
If you are struggling to afford your mortgage payments, you should contact your lender as soon as possible. Your lender may be able to offer you some help, such as a payment holiday or a reduced interest rate.
Rising interest rates are a challenge for borrowers, but there are steps you can take to protect yourself. By being aware of the impact of rising interest rates and taking steps to manage your mortgage, you can help to ensure that you can afford your home.
When is the next base rate meeting?
The Bank of England’s Monetary Policy Committee (MPC) meets eight times a year to set the base rate. The next MPC meetings in 2023 are scheduled for:
- June 14-15
- August 1-2
- September 12-13
- October 10-11
- November 7-8
- December 5-6
The MPC will announce its decision on the base rate at 12:00 noon on the day after each meeting. The minutes of each meeting will be published four weeks after the meeting.
When will the base rate come back down?
is difficult to say when interest rates will come back down in the UK. The Bank of England has said that it will continue to raise interest rates until inflation is under control and so far has remained higher than they have anticipated. However, it is also aware of the impact that rising interest rates are having on the economy. If inflation starts to come down, the Bank of England may start to lower interest rates. However, it is too early to say when this will happen as a lot hangs in the balance.
What to do if you are concerned about rising rates?
We understand it can be alarming to hear mortgages are currently more expensive, which combined with other cost of living increases can make the prospect even more daunting. However, if you find yourself needing to remortgage in 2023 it’s important to speak to a mortgage broker who can advise on your personal circumstances and finance as no two clients will be in the same position. If you are unsure if you can continue to pay your mortgage here are our top tips to consider:
- Contact your lender as soon as possible.
- Explain your situation to your lender and ask for help.
- Your lender may be able to offer you a payment holiday or some form of temporary arrangement.
Whatever you do though don’t bury your head in the sand and seek help where needed.