The big question - if the base rate rises again, what will happen to mortgage rates?

If you're thinking of buying a home, or are coming to the end of your current mortgage deal, you might be wondering what's going to happen to mortgage rates over the coming months.

The Bank of England will announce their next decision on interest rates on 23 March. The Bank’s Monetary Policy Committee meets around every six weeks to vote on whether to change its Base Rate, and by how much.  

Base Rate matters because it affects how much money people can earn on their savings, as well as how much they pay to borrow money, including for mortgages. 

In February, the Bank raised interest rates to 4% – the highest they’d been for 14 years. The 10 consecutive rises we’ve seen since December 2021 aim to reduce high levels of inflation, which is currently at 10.1%. The Government sets the Bank an inflation target of 2%, which is why it has said it will consider raising interest rates further, until inflation is under control. 

Currently, market expectations are that the Bank is unlikely to change rates in March, and they’ll therefore remain at 4%. But this will only be confirmed when the Bank’s Monetary Policy Committee makes its announcement at midday on 23 March. 

How are interest rate rises affecting mortgage rates?

Even though interest rates have been rising, this hasn’t followed through to mortgage rates in the past few months, and how lenders have been pricing their mortgage products. 

Looking back at the last three rate rises, the market had forecasted how the Bank was going to react. This meant that lenders baked this into mortgage pricing before the decision was made. So even though the Bank increased rates, we actually saw mortgage rates reduce overall.

We’ve seen mortgage rates start to stabilise in recent weeks, with some lenders starting to increase their prices. This is because market analysts were forecasting that interest rates may have needed to stay higher for longer than originally thought, in order to address high inflation. 

But there are many other factors at play in the markets at the moment, particularly the Spring Budget and the impact of events surrounding the Silicon Valley Bank in the USA. It will now be a case of waiting to see how the Bank responds next week and then how quickly these things feed through to mortgage rates.

How could different types of mortgages be affected?

If you’re on a fixed-rate mortgage, the good news is that your payments won’t change, at least until the end of your current deal. 

If you’re on a fixed rate product that’s coming to an end in the next six months, you might want to see whether locking in a deal now could be a good option for you. As the cost of borrowing is a lot higher than it was five, or even two, years ago, it’s likely that you’ll be offered a higher rate, and with that, higher monthly repayments. 

If you’re one of the estimated 15% of mortgage-holders on a tracker or variable mortgage, you’ll see your monthly payments go up fairly instantly. This is because tracker mortgages are normally set against the Bank’s interest rate, plus a percentage.  

When could interest rates start to drop?

Right now, it’s thought that we’re likely to see interest rates peak at about 4.25% later in the year, before they start to come down. 

After 23 March, the Bank’s next interest rate announcement will be on 11 May. 

My deal is expiring, what should I do?

Seek advice from a whole of market broker rather than just your bank. As little as 0.25% less on your rate could save as much as £10,000 over the lifetime of your mortgage*.

Start here:

Dig out your paperwork to check when your deal ends and your current interest rate.

Get organised. Lenders usually let you secure an offer within six months of the end of your current deal. It generally takes at least four weeks to complete a mortgage offer. Leave it too late and you could end up paying the more expensive SVR for a period between deals.

Look at your budget to decide what you can afford. Your income or circumstances may have changed since your last mortgage. The more complex your situation, the narrower the choice of deals, and the longer it can take to process.


Need advice, Reades Financial Services Can help. We are independent, whole of market mortgage brokers and offer free advice with no obligation, so there is nothing to lose and everything to gain from speaking with one of our advisors.

You can request a callback to claim £50 cashback on completion of your mortgage, or get in touch to discuss your requirements - 01244 538 538. Lines open 24/7.

*Based on a mortgage of £240,000 repaid over 25 years at a rate of 4.25%, the amount repayable over the lifetime of the loan will be £389,906. At a rate of 4%, the amount repayable will be £379,883 saving £10,023.

Your home may be repossessed if you do not keep up with your mortgage repayments. Charges may apply.

Rates often fluctuate and therefore are subject to change at any time. Nothing in this article is to be interpreted as advice.

Source - Rightmove