How Will the Latest Interest Rate Rise Affect My Mortage?

Current Interest Rate (as of 9th May 2024):


Against the backdrop of a post-pandemic world and a struggling economy, rising interest rates feel like a constant feature of the news. This blog is dedicated to explaining the true implications of these rises. In particular, the effect that they will have – and have had – on mortgage payments and the number of home repossessions. 

mortgage interest rates rise

A Timeline of Interest Rates

Before we delve into the mechanics of rising interest rates and their subsequent impact on mortgages, we will first lay out how interest rates have changed during and following the pandemic:

Date Interest Rate (%)
19 March 2020 0.10
16 December 2021 0.25
03 February 2022 0.50
17 March 2022 0.75
05 May 2022 1.00
16 June 2022 1.25
04 August 2022 1.75
22 September 2022 2.25
03 November 2022 3
15 December 2022 3.5
02 February 2023 4
23 March 2023 4.25
11 May 2023 4.5
22 June 2023 5
03 August 2023 5.25
21 September 2023 5.25
02 November 2023 5.25
14 December 2023 5.25
1 February 2024 5.25
21 March 2024 5.25
9 May 2024 5.25

Next interest rate due: 20 June 2024

The increasingly sharp rises in recent times have not come as a surprise to many, with most economists expecting this trend to continue. In fact, interest rates are predicted to rise to 5.5% by July 2023. The last time that interest rates were that high in the UK was during the recession in December 2007.

Bank of England bank rate change

Why Do Interest Rates Rise in the First Place?

Controlled by the Bank of England (BoE), interest rate rises are used as a tool to curb inflation i.e. the general increase in the prices of goods and services within an economy. The current UK inflation rate is 3.2% as of May 2024.

When prices increase, people need higher salaries to keep up with the rising cost of living. In turn, inflation has to be tackled to ensure that the purchasing power of consumers is not continuously reduced. 

But how exactly does an interest rate rise help to tackle inflation? The logic is as follows:

  1. When interest rates increase, people and businesses will opt to save and be less likely to take out loans.
  2. This is because they will receive better returns on their savings and it will cost them more to borrow. 
  3. With less disposable income being spent, the economy slows and inflation decreases.

In short, higher interest rates encourages people to save rather than spend, and this helps to stop rising prices as there is less demand.

Read more: Are Interest Rates at a Peak? What it Means for Homeowners

What Do Interest Rates Have to Do with Mortgages?

One of the biggest concerns surrounding an increase in interest rates is the effect that it will have on mortgages. The effect it will have, however, depends on what type of mortgage you have.

Homeowners with a tracker mortgage will see an immediate change to their monthly payments, as these mortgages mirror the base rate of interest. When it rises, payments rise, and when it falls, so too do your bills! Meanwhile, if you are on a fixed-rate deal, higher interest rates will not impact your mortgage payments until your deal expires.

Many homeowners approaching the end of their fixed-rate deal are currently looking to lock in a new rate to avoid getting stung by higher interest rates further down the line. Nonetheless, there are a few things to be wary of if you are planning to exit your deal early. Most importantly, you must ensure that the savings on your new fixed-rate deal will outweigh the cost of any exit fees you will have to pay.

Do Rising Interest Rates Lead to More Home Repossessions?

Higher interest rates produce an increase in mortgage payments for those borrowing at a variable rate of interest. In tandem with soaring energy and food bills, this has left many homeowners struggling to pay their mortgages. 

As Myron Jobson, senior personal finance analyst at Interactive Investor has said: “With households also facing unprecedented cost pressures from all sides and interest rates set to rise further to rein in rampant inflation, the harsh reality is there is likely to be a rise in the number of people losing their homes as they fall into arrears.”

Read more: Repossession Statistics for Q1 of 2024: Overview

Stop Home Repossession with HMS

If you are currently facing repossession or struggling to keep up with mortgage payments, HMS is here to help. We have over a decade of experience in helping homeowners avoid repossession and – during that time – have a number of success stories to show for it. Call us today on 0808 109 3559 or complete our contact form, so that we can help stop the repossession of your home.