The Bank of England is raising interest rates and this is driving up mortgage rates, our calculator lets you work out what this could cost you.
You can work out how much extra you would pay on your mortgage if your lender changes the rate you are paying (or how much you would save if rates came down).
The calculator lets you use your current mortgage rate and see how different levels of rate rises would increase interest and monthly payments.
Enter a figure for the size of the rate rise, for example, 0.25, 0.50. or 0.75, or a negative value (eg -0.25) for a rate cut.
> Check the best live mortgage rates you could apply for with our mortgage finder
What is happening to interest rates
After more than a decade in the doldrums following the financial crisis, interest rates are rising rapidly.
The Bank of England’s base rate, officially known as Bank Rate, has climbed from 0.1 per cent last December to 2.25 per cent now and is expected to continue to rise.
A decision is due at midday on 3 November, when the Bank is expected to add another 0.75 percentage points to take base rate to 3 per cent.
This comes as the Bank of England’s Monetary Policy Committee – the group of expert economists who vote on what the base rate should be – looks to try to get inflation under control.
The idea is that by raising base rate, it raises the cost of borrowing and that reduces demand for it from consumers, households and businesses, which slows the economy down.
In theory, this should eventually reduce inflation, which is currently way over the Bank of England’s 2 per cent target at 10.1 per cent.
The Bank of England has been rapidly raising interest rates since the end of 2021, with base rate – or Bank Rate – as it is officially known climbing from 0.1 per cent to 2.25 per cent
Base rate vs mortgage rates
When the Bank of England changes the base rate some mortgage rates will move, but not all.
Fixed deals will remain at the same level until they finish, base rate trackers will move by the same amount as the Bank’s shift, and standard variable rates or other deals linked to them will move by an amount decided by the lender.
The cost of fixed rate mortgages has risen substantially over the past year, driven higher by the Bank of England raising rates and compounded by the fallout fom Liz Truss and Kwasi Kwarteng’s badly received mini-Budget.
The debt-funded tax cuts in this – since reversed – triggered financial turmoil, government borrowing costs to spike, a pension fund bond sell-off vicious circle, and expectations rates would have to rise by more.
Government borrowing costs, as measured by gilt yields, have since fallen back to pre-mini-Budget levels after a Bank of England intervention, before Kwarteng and then Truss resigned and Jeremy Hunt took over as Chancellor and Rishi Sunak as Prime Minister, but fixed mortgage rates remain high.
The average two-year fixed rate currently stands at 6.47 per cent and the average five-year fixed rate at 6.32 per cent. In November 2021, the averages were 2.29 per cent and 2.59 per cent, respectively.
Latest interest rates and mortgages news
Read our regularly updated guide to find out more: What next for mortgage rates and should you fix?
Our Mortgages & home section also features all our latest mortgage rates articles.
Savers are benefitting from higher rates – check the best savings rates in our independent tables.
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