How Much Will My Mortgage Increase Following the Interest Rate Increase?

By Kristian Derrick

Last Reviewed: 3rd November 2023

According to Statista, mortgage rates increased at a record pace in 2022.

In fact, reports show that rates for 10-year fixed mortgages doubled between March and December 2022.

On June 22, 2023, the Bank of England had a base rate increase from 5% to 5.25%.

What does that mean for you and your monthly mortgage payments?

Do Mortgage Payments Increase with the Interest Rate?

In short, yes, certain mortgages will increase when interest rates hike.

The mortgage types affected by increases in interest rates include variable and tracker mortgages.

Tracker mortgages follow the ebbs and flows of the Bank of England’s base rate.

The moment the base rate increases, a tracker mortgage will increase. Average tracker mortgages are estimated to be up by around £23.71.

Standard variable mortgages aren’t as predictable, as it’s up to the mortgage provider how they will hike their interest rates.

In most instances, they may choose to increase their interest rate, too, which could be more or less than the Bank of England’s base rate.

Industry investigations show that after the recent interest rate hike, standard variable rate mortgages have risen by around £15.14.

Fixed-rate mortgages, however, aren’t impacted by fluctuations in the Bank of England’s interest rate.

Fixed Rate Mortgages

When acquiring a fixed-rate mortgage, your interest rate is set for a specific period.

This means that your mortgage won’t increase if the Bank of England increases its base rate.

Having a fixed-rate mortgage still requires you to keep an eye on the interest rate fluctuations, though. Remember that fixed-rate mortgages only last for a certain period.

When that period is up, you may face significantly higher interest rates than your original offer.

When is the Next Expected Interest Rate Hike?

Around every 6 weeks, the Bank of England carries out reviews on the interest rate. This means that the rate is reviewed 8 times per year.

Upcoming confirmed review dates by The Bank of England (which could change without warning) include the following:


  • November 2, 2023
  • December 14, 2023

Generally, the Bank of England keeps inflation set at approximately 2%.

With the cost of living crisis raging, the percentage increase has been less than anticipated in the last few reviews.

Should I Remortgage Now, Just to Be Safe?

Whether you should remortgage now will depend on what your current mortgage deal is.

The current base rate is at 5.25%, and because of this, and taking your unique situation into account, there could be an opportunity to save.

Those who have fixed-rate mortgages that are due to finalise in the next few months may want to secure a new deal instead of waiting for the deal to end.

This means you will have some time to compare deals and make sure you’re taking up the best option.

For those who have a standard variable rate mortgage and want to avoid the negative impact of potential upcoming interest rate hikes, remortgaging to a fixed rate mortgage now may be a good idea.

This may give you peace of mind, knowing exactly what your upcoming costs will be for the next few years.

Consulting with a professional mortgage broker will ensure that you get sufficient advice and guidance on which mortgage options are best for you and whether you should remortgage now or let your current contract run out.


What is the Reason for Raising Interest Rates?

Inflation is the reason interest rates rise. The higher the inflation rates are, the more likely interest rates will increase.

Lenders will require higher interest rates to compensate for the reduced purchasing power of money that they’re paid in the future.

How Does The Bank of England Increase Interest Rates?

The Bank’s Monetary Policy Committee determines whether to raise, reduce, or keep current the interest rate.

The committee consists of 9 members who meet 8 times yearly to discuss the current interest rate and decide what to do with it.

The minutes of these meetings are always published and made public.

Who Benefits from Inflation?

Inflation can benefit both borrowers and lenders.

Regarding lenders, inflation creates a demand for increased credit, which comes with increased interest.

For borrowers, inflation enables them to pay back money worth less than when they originally accessed the money, which is beneficial.

Which Debts Should I Pay Off First During Inflation?

While all debts should be paid off according to your agreement in place with the lender, when inflation rises, it’s recommended to pay off variable-rate loans as quickly as possible as these generally have a higher interest rate.

What Are the Main Benefits of a Fixed-Rate Mortgage?

With a fixed-rate mortgage, you’ll have peace of mind knowing just how much you’ll be expected to pay towards your instalments each month.

Fixed-rate mortgages allow first-time buyers to budget for a fixed period, making buying a first property less daunting.

Also, with a fixed-rate mortgage, you’re protected from possible interest rate hikes.

What Should I Do If I Can’t Afford My Mortgage Increase?

If increases in interest rates mean that you can no longer afford your mortgage payments, you’ll need to advise your lender as soon as possible.

You can extend your mortgage’s terms or even take a payment holiday to get a bit of a breather.

You will find that your lender will work with you to devise a solution.

How Do I Calculate How Much My Mortgage Will Increase?

If you’d like to know what your mortgage will cost you with an upcoming increase, there are several online mortgage calculators that you can use.

These typically allow users to adjust the settings and parameters to calculate mortgage payments based on certain factors.

Alternatively, consulting with a professional mortgage advisor can be helpful.

Such professionals will help you understand the ins and outs of mortgages available to you and will ensure that you have a good idea of what to expect in terms of monthly mortgage instalments.

Mortgage advisors can also ensure that your application is properly prepared to help you avoid potential disappointment.

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