Why are rising interest rates bad news for mortgage holders? And what role does inflation play in pushing repayments higher?

Inflationary effect

The pace of inflation has been well ahead of the Bank of England’s (BoE’s) target of 2% throughout 2022. In September, the consumer prices index (CPI) rose to 10.1%1. The BoE’s latest forecasts show it will stay above 10% for the next few months.

In response, the BoE’s Bank Rate has also been rising to try to get inflation back on track.

Mortgage holders

Those on a tracker mortgage have seen their rate increase with the Bank Rate, while those on standard variable rates (SVR) have also gone up. Fixed-rate mortgage holders are protected for now but will likely end up paying more when their current plan ends.

Monthly rise

Anyone looking to take out a new mortgage will find themselves with higher repayments than they would have faced a year ago. On top of higher prices in shops, this is causing many to struggle, with 7.8 million2 saying they find bills a ‘heavy burden’.

Get in touch

Whether you’re remortgaging or making a new purchase, we can help you navigate the choppy waters and find the best deal for your unique circumstance.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

1 Office for National Statistics

2 Financial Conduct Authority