Whether you’re buying your first home or it’s nearly time to remortgage, nobody wants to hear that mortgage rates are rising. Unfortunately, this is the reality for many of us at the moment, as global events, including the war in Iran, are having implications far and wide and driving mortgage rates up.
The most frustrating part of any rise in mortgage rates is that there’s usually nothing you can do to change things. It might feel tempting to just ‘wait it out’, but there’s absolutely no guarantee that things will get better. In fact, mortgage rates could just as easily continue to climb.
However, staying calm and keeping yourself informed will put you in the best position. That’s why we’ve put together this simple guide on what to do when mortgage rates rise, covering various stages of homeownership, so that you can make informed next steps.
Are Mortgage Rates Rising?
Central to all of the current panic is one key question: Are mortgage rates rising? The simple answer to this is yes. Mortgage rates are currently on the rise due to the global instability created by the war in Iran.
The war in Iran has created much uncertainty surrounding inflation. When inflation is expected to increase, the Bank of England is typically much less likely to cut its base rate and may even consider raising it to keep inflation under control. This directly affects the mortgage market as lenders will then price their products based on future interest rate expectations. Because lenders cannot yet get a clear picture of what will happen in the long term, they’re raising rates now.
Our mortgage advisers in Plymouth are seeing this play out in real time at the moment. Products are currently being repriced daily; in some cases, lenders are even pulling their deals altogether. For example, the average five-year fixed rate has risen from 4.95% at the start of March to 5.52% as of the 24th March (the highest rate since July 2024). Products which are available to those borrowing with just a deposit of 5% are also being pulled from the market, with more withdrawn in a single day than at any time since 2022.
What Happens When Mortgage Rates Rise?
The reason that all of this talk of mortgage rates rising is causing such panic is that it has a direct impact on how far your money goes. When mortgage rates rise, borrowing becomes more expensive. This might mean that you cannot afford as much as you initially thought, or are facing the prospect of your current mortgage payments jumping up significantly when you next need to remortgage.
Ultimately, though, rising mortgage rates affect different people in different ways. We have outlined our advice to key groups below.
Advice For First Time Buyers
Rising mortgage rates might be the most daunting if you’re trying to get onto the property ladder and have little to no experience of volatility in the mortgage market. If you’re in this position, our main advice is not to panic. There are still plenty of options available which will allow you to purchase your first home – you just need to be well prepared.
To mitigate rising mortgage rates, you should:
- Speak to a mortgage adviser as early as possible, as they’ll be able to give you a proper idea of what you can borrow and how rates are changing.
- Have your documents ready, in case you need to quickly secure a deal before rates change.
- Save as much as possible, as a larger deposit can open you up to better rates and more product options.
Advice For Home Movers
If you’re already on the property ladder but planning to move home, rising mortgage rates can complicate things slightly (but shouldn’t jeopardise your move entirely). Ultimately, you might find that your overall cost of borrowing creeps up if you’re upsizing, which might impact your overall budget.
If you don’t already know or haven’t got to this stage yet, it’s also worth finding out if you can port your current mortgage to your new property. In theory, this might mean that you can port your existing rate when you move rather than having to remortgage and potentially be exposed to rising rates.
Remortgaging Advice
We’ve spoken time and time again about how important it is to act early if your current mortgage deal is coming to an end. A climate of rising mortgage rates makes this even more important.
If you are remortgaging or close to needing to remortgage, know that you can usually secure a new mortgage rate up to six months before your current mortgage deal runs out. This means that you can lock in a rate now and protect yourself from any further possible rate increases.
What’s even better to know is that locking in a rate now doesn’t mean you’re tied in should things get better in the future. If rates start to stabilise and improve before your new deal is due to start, it’s usually possible to switch to a better product.
Speak To Us
Whichever stage of homeownership you are at, our main advice on what to do when mortgage rates rise remains the same: act early and get proper guidance.
At Mewstone Mortgage Advice, our mortgage advisers in Plymouth are on hand to help you navigate the current market complexities and find a product that suits your circumstances. Whether you’re currently in the midst of a remortgage and tearing your hair out or planning to get on the property ladder this year and spooked by rate rise reports, please get in touch via 01752 938933 or book a call at a time that suits you and we can talk things through in more detail.
Mark John
CeMAP Certified Mortgage Adviser
Mark has called the South Hams home since age 2, attending school in Ivybridge. Art, music, skating and guitar filled his younger days. Though he never reached rock star status, Mark did qualify as a sound engineer.
Now Mark resides in Wembury with his wife Chloe. Living by the sea shapes their life, even inspiring some dodgy surfing! Outnumbered by sons Ethan, Eli and Leo, their pride and joy is their VW camper van.