Near the end of your mortgage deal? Rising inflation may push up interest rates. What does this mean for you?

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October 07, 2021 - Laura Bradford

Near the end of your mortgage deal? Rising inflation may push up interest rates. What does this mean for you?

The rising price of petrol, gas and food in the UK are real concerns and many people are preparing for a noticeable change in their bills this winter.

The country measures and tracks the cost of living using the rate of inflation and it is a good indicator to see how we are all financially effected. In March 2021 the UK’s inflation rate was at 1% and we are now heading towards a rate of 4%. The Governor of the Bank of England, Andrew Bailey, has warned that interest rates will have to be increased if inflation continues to rise, and he has not ruled out a rate rise by the end of the year.

A rise in interest rates will act to curb rising inflation and provide stability to the economy, but it also means that those on a variable rate mortgage will see their repayments immediately increase each month, and those who are coming out of a mortgage deal are likely to find new products that are more expensive.

This means those who are exposed to a variable mortgage rate rise should consider getting advice now to see whether locking into a fixed rate would be suitable, and  they should consider locking into a 2, 3, or even 10 year fixed rate mortgage if the stability of a regular and fixed mortgage repayment would be beneficial.

A fixed rate mortgage does exactly what its name describes: it fixes the interest rate of your loan for a set amount of time. This means that even if interest rates fluctuate, your loan stays the same and your monthly repayment is fixed.

You can get short- and long-term fixed-rate mortgages, the most suitable will depend on your personal circumstances. Typically, shorter fixed rate mortgages offer cheaper interest rates, but many people find the benefits of a longer-term fixed arrangement outweigh the slightly higher costs.

A fixed-rate mortgage is a contract, so it is important to understand the clauses of breaking this contract early with the lender. You may want to pay off the mortgage or move to a new lender before the end date, and in these sort of situations there may be a charge to break out of the arrangement, often called an exit fee. This is why 10-year fixed-rate mortgages should only be considered if you are fairly certain that you have no plans to move.

Most lenders allow annual overpayments of up to 10 percent of the loan value with a fixed-rate mortgage. If over-paying is important to you then it is worth making sure this option is available on the mortgage product you are considering.

If you are currently in a mortgage arrangement which hasn’t yet ended it is still worth speaking to a mortgage adviser now. You can typically arrange a new mortgage loan in the six months prior to your existing loan coming to an end, ensuring a smooth transfer from one mortgage deal to another.


Our Mortgage Advisers can help

To find out more about moving your mortgage onto a new mortgage deal or to find out more about fixed-rate mortgage loans give our team of mortgage advisers a call on 0116 269 6311 or email

Your home may be repossessed if you do not keep up repayments on your mortgage.