Mortgage calculator: How much will interest rate rise cost you?

The Bank of England is raising interest rates and this has driven up mortgage rates – our calculator lets you work out what this could cost you.

The latest move up was a 0.5 percentage point hike to the base rate, voted for at the February 2023 Monetary Policy Committee meeting 

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 rocketed up from 0.1 per cent in December to 4 per cent now. It is expected to rise again but analysts are divided on whether there will be one or two more rises.

The most recent rise came on Thursday, 2 February, when the Bank’s rate setters added another 0.5 per cent to take base rate from 3.5 per cent to 4 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 consumer prices index inflation, which is currently way over the Bank of England’s 2 per cent target at 10.5 per cent in December 2022, according to the ONS

The Bank of England base rate has now hit 4% a level not seen since the financial crisis cuts

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. The spike was compounded by the fallout fom Liz Truss and Kwasi Kwarteng’s badly received mini-Budget and saw average two-year fixed rates top 6.5 per cent.

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, with a Bank of England intervention, Kwarteng and then Truss resigning and Jeremy Hunt and Rishi Sunak as Chancellor and Prime Minister, respectively, calming markets.

Nonetheless, fixed mortgage rates remain far higher than they were a year ago at about 2.5 per cent.

Average two and five-year fixed rate mortgages peaked above 6.5 per cent in October but have now slipped back to 5.44 per cent and 5. 2 per cent, respectively, but the best mortgage deals are now nearing 4 per cent.  

Read our What next for mortgage rates? guide to get the latest news on what is happening with rates.

What to do if you need a mortgage 

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value

What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. 

Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal. 

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for 

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.

Be the first to find out about Bank of England rate changes – follow This is Money on Twitter. Or get weekly updates rates predictions and other big issues in our This is Money newsletter – sign up using the box below.

We also discuss the latest rate moves, best mortgages and savings rates and more on our weekly podcast. Visit the This is Money Podcast channel or listen at Apple Podcasts, Spotify, Audioboom, YouTube and more.