When purchasing a property, many will require a mortgage. An important factor when choosing the right mortgage deal for you is the interest rate. You must consider not just the rate at the start of the term. It’s also important to consider how changes to the rate during the term may impact your monthly payments. Navigating all this can be challenging for homeowners. It is possible, though, to minimise the impact of these changes. In this article, we’ll explore strategies to cope.
Why do interest rates fluctuate?
The interest rate on your mortgage is the amount charged by your lender to borrow the money. It is expressed as a percentage of the amount borrowed. Interest rates offered by mortgage lenders fluctuate with the Bank of England base interest rate*. The base rate, in turn, is impacted by factors such as inflation. The Bank of England may raise the base rate in response to high inflation in a bid to lower inflation. Unexpected events around the world can impact economies globally which can also impact interest rates.
What mortgage types are affected by changing interest rates?
Through the duration of your mortgage term, your monthly payments may change depending on the interest rate charged. Unless you have a fixed rate mortgage deal, it is not possible to be sure of what your payments will be. Variable, tracker and interest-only mortgages will all have fluctuating interest rates throughout the term. Those who require consistency in their financial outgoings may therefore choose a fixed rate mortgage. Initial interest rates may be higher for these mortgages, though.
Strategies to minimise the impact of changes
Firstly, knowledge is key. By understanding the economic indicators to watch for, you can be prepared for changes. It is then important to monitor market trends and the financial landscape. Bell Mortgage Solutions can provide you with this information and keep you informed.
If financial stability and consistency is paramount for you, a fixed-rate mortgage may be more suitable for you. This will offer protection against future rate increases throughout the term of the deal. It may, however, lead to paying a higher rate if the interest rates fall.
For those choosing a mortgage deal impacted by rate changes, building a financial buffer can be wise. This will help to cover unexpected expenses or fluctuations in mortgage payments due to interest rate changes. Any money that can be set aside each month will help lessen the impact of rate changes. Reviewing your budget and financial priorities along with your incomings and outgoings can help with this.
Any money you can put to one side can also be used as over-payments for your mortgage. There are usually limits to how much extra you can pay off your mortgage each year. If you are able to, though, you should see a decrease in your monthly payments. If your mortgage balance is lowers, the amount of interest added will also go down. Thus, the impact of interest rate changes will be diminished.
How can Bell Mortgage Solutions help?
As with any mortgage-related concerns, we are able to help! We are able to access lenders from across the market. We are committed to working with you to find the right deal for your circumstances and needs. Contact us now to book a consultation.
Please note: Your home may be repossessed if you do not keep up repayments on your mortgage.
* Please be aware that by clicking onto the above link you are leaving the Bell Mortgage Solutions website. Please note that neither Bell Mortgage Solutions nor PRIMIS are responsible for the accuracy of the information contained within the linked site accessible from this page.
The information contained within was correct at the time of publication but is subject to change.
Bell Mortgage Solutions 