The Bank of England has raised its interest rate to 1.25% (up from 1%). This is the fourth time it’s raised rates this year.
Their aim is to combat inflation, which is predicted to hit 10% this year. But higher rates also mean it costs more to borrow money – which tightens the squeeze we’re all already feeling.
This can feel daunting to say the least. But there are ways you can save money on your mortgage to give yourself a bit of breathing room. And don’t forget, we’re always here to help.
If you’re looking to buy
Start by figuring out how much you can borrow. Then check our mortgage comparison table to get a sense of what deals are available, and how much you should budget for each month. Be aware that this is only a snapshot of rates today – and that they’re likely to increase in the future.
When it’s time to actually choose and apply for your mortgage, it’s best to speak to a whole of market broker. They can make sure you end up with the cheapest and most suitable deal out there.
If you’re on a variable, tracker rate or standard variable rate (SVR)
Your repayments are likely to go up. On tracker mortgages, the change will be immediate, and on a variable rate, it’s up to the lender. Speak to a broker (like Habito!) to find out if you'd be better off switching to a fixed rate before rates rise again.
If you’re on a fixed rate with 6 months or less left
Now is the time to speak to a broker and get ahead of any further rate rises. Many lenders issue mortgage offers that last 6 months, so you can lock in a rate now ready for the moment you’re able to switch.
It’s taking longer to process applications right now, so get your documents ready early – make sure your ID is up to date, and check you’ve got the correct address on your bank statements. This will help you avoid delays when it’s time to submit.
Talk to a broker like Habito to help you decide if you should secure a new fixed rate with your existing lender or remortgage to another lender. Going with your current lender can save time, but there might be a better deal out there that can save you money.
If you have spare cash, and you’re thinking about switching
Before you switch, consider if you can afford to make an overpayment to drop you down to the next LTV band. This will unlock better mortgage rates when it’s time to switch. Be aware that during most fixed deals, you can only overpay up to 10% (but there’s usually no limit for variable or SVR mortgages).
If you’re struggling to make your monthly repayments
Talk to your lender as soon as you can. They have a legal duty to treat you fairly, and take all your circumstances into account in situations like these. So they should be able to give you options to ease the burden – like increasing your mortgage term, which would lower your monthly payments (though you’d pay more interest over the whole term).
You don’t have to suffer in silence. You can talk to our expert brokers about all things to do with your mortgage. And for bigger picture help with your finances, you can reach out to Citizens Advice.