What Do Rising Interest Rates Mean For Current And Prospective Homeowners?

1 December 2022 | Finance, General

How much will the cost of my mortgage rise?

Your mortgage’s increase will depend on whether you have a fixed rate, standard variable rate, or tracker mortgage. If you have a fixed rate mortgage, you won’t see any improvements in your mortgage for the time being, but homeowners are advised to pay attention to their mortgages because base rates are likely to keep rising through 2022 and into 2023.

Should I refinance straight away?

There is undoubtedly more consumer interest in changing their mortgage plan early. With rising concerns about interest rates, the cost of living, and energy costs, homeowners can have some control over their mortgage by locking in their rate for a set amount of time. Although there is typically a price for leaving your existing arrangement early, some customers are willing to pay it to have some protection against future increases in interest rates. Customers who are wanting to act early by preparing ahead for another hike should be aware of this.

Should I change from my SVR to a fixed rate right away?

Because every person’s situation is unique, we wouldn’t offer general recommendations on what you should or shouldn’t do. The best course of action is to talk to your financial advisor and determine the financial ramifications of the anticipated rate increases for you. Even while the market’s volatility has started to decrease over the previous two months, the base rate is still expected to increase, making it even more crucial to assess your unique demands.

Will I have to pay inflated base rates if I take out a fixed rate now?

Naturally, if you decide that switching to a new fixed rate is the best option for you, there may be consequences for trying to switch slightly earlier, and the current fixed rate may be higher than it was previously, but if rates rise as predicted, this is likely to remain below the market price.

Should I purchase a more expensive home now or wait when my family is bigger and needs more space?

Personal circumstances and budget are critical because some people are now unable to borrow enough money for the homes they desire, despite the fact that a fortunate few have escaped the crisis relatively unscathed due to high income and/or assets. For those looking to “trade-up,” negotiating the location of their property may be necessary. Moving outside of cities to find larger properties isn’t a new phenomenon; it’s been going on since Covid and the “race for space,” when people began to leave the city life in search of homes with more outdoor space, as well as the rise in popularity of rural and seaside areas. Higher mortgage payments are typically associated with a more expensive home, as debt servicing expenses are also on the rise. As a result, some prospective buyers may decide to postpone their purchase until house prices have stabilized or even begun to fall.

Should I buy as soon as possible despite the fact that I am a first-time buyer?

With rising housing costs and decreasing affordability, the market is becoming increasingly constrained. As a result of rising debt servicing costs, as well as the effects of price increases on energy, fuel, and general household inflation, a significant gap is beginning to form between what potential buyers want and what is financially feasible. Many first-time buyers, particularly those without access to the Bank of Mom and Dad, may decide to postpone their purchase for the time being. With inquiries and traffic levels lower than they were 18 months ago, the number of homebuyers and housing demand has begun to fall. It would not be surprising to see more incentives offered in the future to reduce the high costs associated with purchasing a first home, such as the inclusion of white goods in the new construction market.

Before the restrictions on cost of living, rate increases, and the virus situation, I could comfortably finance my mortgage, but now I can’t. So, what should I do now? 

First and foremost, if you are having difficulty making your mortgage payments, you should contact your lender as soon as possible. Lenders are expected to be patient and to make every effort to help you during a difficult financial period. Due to the costs and negative publicity involved, lenders will do everything in their power to avoid having to evict a struggling homeowner. Your lender will be able to better determine what options are best for you if you describe your specific situation to them. For example, they may recommend temporarily switching your mortgage from a capital and interest repayment to an interest only payment for a limited time until you are in a position where you can afford to continue with your payments.


  • Danielle Stone

    She has been writing professionally for 8 years, with articles published in various print and online publications. She is an avid researcher and strives to bring her readers the most up-to-date information and insights on the topics she covers. Danielle is also an expert on home renovation, interior design and construction, and she loves helping homeowners turn their dreams into realities. When she’s not writing or editing, Danielle enjoys spending time with her family, gardening and exploring nature.

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