How will the UK interest rates affect you?

November, 2022

House prices are predicted to fall in 2023, though by how much remains a subject of debate.

The Bank of England has hiked interest rates by 0.75 percentage points to 3% – the eighth rise since last December and the biggest since 1989. So what does this mean for your finances?

How will it affect mortgage payments?

It will hit many of the roughly 2.2 million people on a variable rate mortgage hard, at a time when other costs are rising. Many now face paying hundreds of pounds extra a year – and for some with bigger loans it will be thousands.

About half of that 2.2 million are either on a tracker or discounted-rate deal. The other half are paying their lender’s standard variable rate (SVR).

A tracker directly follows the base rate, so your payments will almost certainly soon reflect the full rise. On a tracker previously at 3.5%, the interest rate would rise to 4.25%, adding £59 a month to a £150,000 repayment mortgage with 20 years remaining. If that were an interest-only mortgage, it would be an extra £93 a month.

SVRs change at the lender’s discretion, but most will go up, though not necessarily by the full 0.75 points. Some lenders may take some time to announce what they are doing.

However, about 6.3m UK mortgages (three-quarters of the total) are fixed-rate home loans. These borrowers are insulated until their deals expire, but for many that will be in the next few weeks or months.

New mortgages?

It’s been – and continues to be – a really tough time for anyone looking for a new fixed-rate mortgage, whether to buy their first property or to replace a deal coming to an end.

The price of new fixes had already been marching upwards, but really shot up after Kwasi Kwarteng’s disastrous mini-budget unleashed chaos in the financial markets. The average new two-year fixed rate home loan surged from 4.74% on 23 September to 6.65% by 20 October.

However, in the last couple of weeks some lenders have started trimming their new fixed rates, slowly bringing the average new two-year fixed rate down to 6.46% on Thursday.

Lenders had already priced in a chunky rate hike, and it is money market “swap rates” – which have been coming down in recent weeks – that largely determine the pricing of new fixed deals.

What about those that are already struggling?

Experts have suggested that those who are engaging with their lender and paying some of their mortgage instalments off, are less likely being faced with repossession. Repossession will always be a last resort after other options have been exhausted.

Will house prices fall?

One of the key drivers of house prices is what people can borrow, so higher borrowing costs will have a big impact. Experts predict we are likely to see a decline in house prices in 2023 by up to 10%, however people are still keen to buy and sell and therefore to motivation to move will not disappear as house prices drop.

Thinking of selling?

If you have had thoughts about selling and looking for a local independent estate agency in Shirley, Solihull, contact our team on 0121 430 4448, alternatively email us on


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