Mortgage and remortgaging
How Interest Rates Affect Mortgages in the UK
What happens when mortgage rates rise or fall? Learn how rate changes affect your monthly repayments, what to expect when a fixed deal ends and how to prepare.
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How do rising interest rates affect UK mortgages?
Interest is the cost of borrowing money. When your mortgage rate increases, more of each payment goes towards interest. For a repayment mortgage, your required monthly payment usually rises if the outstanding balance and remaining term stay the same. If rates fall, payments can fall instead.
What happens when your fixed-rate deal ends?
While you are on a fixed rate, changes in market rates generally do not change your contracted monthly repayment. When the deal expires, you may move to your lender's standard variable rate unless you arrange a new product. Compare remortgage or product-transfer offers before your deal ends, including any arrangement fees and early repayment charges.
Example: a £200,000 repayment mortgage
With 25 years remaining, a 3.76% rate costs approximately £1,029 per month. At 5%, it is approximately £1,169 per month — around £140 more each month, or approximately £1,680 more per year. These are illustrations, not predictions of future UK rates.
Does a Bank of England rate rise immediately affect my mortgage?
Not necessarily. Tracker mortgages typically respond according to their contractual link to a benchmark. Variable-rate deals may change at the lender's discretion. Fixed-rate payments generally stay the same until the fixed period ends. Mortgage pricing also depends on funding costs, competition, credit profile and loan-to-value — not just the Bank of England base rate.
How can I prepare for a higher payment?
- Check when your existing deal expires and whether any early repayment charge applies.
- Stress-test your budget at several possible rates using our mortgage rate calculator.
- Compare the total cost of offers, including fees, not just the headline rate.
- Consider whether an overpayment is appropriate and permitted by your lender.
- Consider a longer term only after weighing the lower monthly payment against potentially higher total interest.
Frequently asked questions
Can I use this calculator if interest rates fall?
Yes. Enter a lower new rate to estimate your potential monthly saving.
Does this work for interest-only mortgages?
Yes. Select interest-only to compare the monthly interest charge. The capital balance remains outstanding and must be repaid separately.
Does this calculate the exact payment on my remortgage date?
No. It holds the balance and term constant to isolate the rate change. For an accurate future quote, use the projected balance at the date of the new deal and confirm the lender's fees and terms.
Calculate the impact on your own mortgage
Enter your outstanding balance, current interest rate and remaining term to compare possible monthly payments. You can then check the impact on your full ABLE Index affordability.
Try the mortgage rate calculator →