Financial Advice on How Interest Rates Impact Your Mortgage

In 2025, the Bank of England adjusted the interest rate several times due to low inflation and easing of price pressure. The base rate is expected to stay at 4%. Now, the question is, will it affect the mortgage rates? On this occasion, the answer may depend on the type of mortgage. Both the lender and borrower typically agree on an interest rate at the time of borrowing money to purchase a home. Taking financial advice from the Reading experts, you can make the best possible decisions.

Types of Mortgage Rates and Their Effect

Standard Variable Rates

If you are someone paying for the mortgage, you may be affected by the change in the interest rate. Whether the base rate goes up or down, it can create an effect on the mortgage rate, especially when there is a tracker or variable rate. However, you may not be able to take advantage of a rate change if you are on a fixed-rate plan.

The mortgage rate is typically set by the mortgage lender, as in the case of the Standard Variable Rate. However, they usually follow the Bank of England Rate. On this occasion, the rate may not change, as is the case with tracker rate mortgages. An increase or decrease in the rate usually follows the customers. Therefore, you may notice a rise or fall in your monthly bills.

A mortgage lender may send a letter explaining the rates. It may provide details on how much you need to pay at the end of the month. If you are paying an SVR mortgage and have not received any updates from the lender, you should contact them to gain a clear understanding of the situation.

Tracker Rate Mortgages

It is a type of mortgage rate that fluctuates in response to changes in other interest rates. On occasion, you may encounter a base rate from the Bank of England and a few per cent extra. If the base rate increases by 0.25%, there will be a corresponding increase in the monthly cost.

The tracker rate usually lasts between 2 and 5 years before reverting to the SVR once again. During this time, you can easily switch to a fixed rate if you are concerned about the potential rate increase in the coming days. However, some tracker rates remain in effect for the life of the loan.

Fixed Rate Mortgages

A change in the fixed rate may not be immediately apparent due to fluctuations in interest rates. During this time, you may pay the same amount for the month, regardless of whether interest rates increase or decrease. Therefore, you may not be affected by economic turmoil. It is also true that you may not be able to gain from the fall in interest. When the fixed-rate terms come to an end, you can remortgage before the change in the interest rate.

If you are facing difficulty with a mortgage payment, you can contact experts from Money Principles for financial advice in Reading. Contact us today to know more.