How to keep on top of your mortgage as interest rates rise

We have had historically low interest rates for some time now, but the latest rise in the cost of borrowing has come amid a cost-of-living crisis already involving higher energy prices, national insurance contributions and other financial pressures.

While it may be a justifiable move to try and tame inflation at the macro level, any rise in the Bank of England base rate means that servicing a standard variable rate mortgage just becomes that bit more expensive for homeowners around the country.

Many variable and tracker rate borrowers – around nine per cent of all mortgage holders – have already been facing steeper repayments from the last base-rate rise in December.

Now, depending on what their lender does, they face the prospect of paying an extra £12 a month per £100,000 of mortgage.

At the same time, there are mortgage holders on fixed rates whose current deals will be due to end sometime this year and who will then be hit if they switch to a variable option.

If you are in either of these camps, there are some options open to you to manage your repayments.

Firstly, shop around. It’s not automatic that all lenders will pass on the latest rate rise so you may be able to find a lower repayment deal by moving elsewhere. It’s at least something to discuss with your current provider.

Secondly, you could investigate what scope there may be to pay off your mortgage early. Not all deals have early repayment charges attached. It’s an important decision which depends on factors such as how far through the mortgage you are and what fees may apply.

Thirdly, if you are on a fixed rate due to end in the coming months, you could try and apply early for a new deal. Some lenders let you apply up to six months before you need to switch, so on the assumption that rates will only go up, you could cushion yourself by making an agreement now.

As a general piece of advice, it’s good to have a plan. While going from 0.25% to 0.5% may not be a seismic rise, we can anticipate that further, consecutive increases may be on the cards to damp down on inflation and navigate the economy out of the impact of the pandemic.

Based on your current mortgage, you could start by working out what level of increase you can safely absorb in the future and create a savings or budget cushion to help you prepare.

We are of course an estate agent rather than a mortgage provider or adviser but we’re always here if you want to have a chat about the financial side of homebuying or selling.

Most homeowners in Portsmouth and Southsea can at least be cheered that relative to their mortgages, the underlying value of their asset is still generally on the up.

In Portsmouth, the average price of a house is £296,371, up 6.3% in the past 12 months and 26.8% over the last five years.

It’s a similar picture in Southsea where the average price, £244,208, reflects a 6.6% rise in the last 12 months and 27% in the past five.

For more information, we highlight a range of essential indicators about the local property scene on our website that you might find useful when you’re looking at mortgage options.

You can also stay up to date on trends in the property market by receiving our quarterly newsletter.

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