After years of interest rates languishing at historically low levels, there are signs that things are starting to move upwards and with many households already struggling with rising food costs, energy costs and council tax increases, having a mortgage that costs more can be a bit of a problem.

The Bank of England (BoE) base interest rate was at just 0.25% for almost a year, and it was then at 0.5% for the seven years beforehand.  Now as the rates have risen back through 0.5% and onto a nine-year high of 0.75%, is there a chance that it could rise even further and bring a lot of misery with it?  There’s renewed speculation that interest rates could start to go up and when the rates do, the changes will affect anyone with a mortgage, so how can you protect yourself?

In the first instance, you should do a bit of forward thinking and try to determine how much a potential rate rise is likely to cost you on your monthly repayment.  For example, if you have a £200,000 mortgage spread over 25 years, you initially put down a 10% deposit, your current interest could be around 3.5%, which means you will be paying around £951 per month.  However, if the base rate goes up by 0.5%, your repayment rises to £1,002 per month.  Add a further 0.5%, the repayment rises to £1,056 per month.  There are plenty of online calculators available to help you work these figures out.  If rises of that kind worries you, what can you do to help protect yourself? Well, you could:

Change to deal with a daily interest rate.  If the interest on your mortgage is calculated at an annual rate, you could still be paying interest on the parts of the loan you have paid off for almost a year after you have repaid it. Change to a daily rate mortgage and you could find your repayments drop.

Look at overpayments.  If you want to stay in the deal that you currently have, then you could look at increasing the amount that you repay thereby effectively reducing how much you owe on the mortgage. If you do this and an interest rate increase occurs you will be in a much better position as those overpayments will have reduced the overall loan amount.

Lock into a new fixed rate deal.  If you are coming to the end of your current deal, or are on standard variable rate, you could certainly look around for a new deal that might lower your interest rate – or at least seal it into a known rate for 2 years up to 10 years, so if rates do go crazy, you are unaffected by them.  The more equity you have in the house will give you greater access to more competitive interest rates, which could equate to even lower monthly repayments.

If you are looking to change your mortgage, speak to our experts at Grange Mortgages, and see how we can help you.