Mortgage rates explained: how the new interest rate increase will affect your mortgage

When interest rates rise, mortgage costs don’t usually move in a simple, identical way for every borrower. The main reason is that mortgage interest rates are set using different mechanisms—some are linked to the Bank of England base rate, while others are determined by your lender.

This article breaks down what typically changes (and what doesn’t) when the Bank of England increases interest rates, so you can better understand how your own mortgage repayments could be affected.

The mortgage rate types that respond differently to interest rate rises

Most borrowers will fall into one of these broad categories.

Fixed-rate mortgages

A fixed-rate mortgage locks in your interest rate for a set period (often two, three or five years).

How it’s usually affected by an interest rate increase

• Your interest rate is typically unchanged during the fixed term.
• Your monthly repayment is generally stable while the fix lasts.

What to watch

• The impact is often timing-based: you may not see changes until your fixed deal ends and you move onto a new rate.

Standard Variable Rate (SVR)

An SVR mortgage is variable, but it isn’t directly tied to the Bank of England base rate. Instead, the lender sets the SVR and can adjust it based on its own pricing.

How it’s usually affected by an interest rate increase

• Your repayments can change, and the timing may be less predictable than a tracker.
• SVR changes often reflect a combination of factors, including funding costs and broader market conditions.

What to watch

• Because the lender controls the SVR, it’s important to keep an eye on official communications and your mortgage statements.

Tracker mortgages

A tracker mortgage is designed to follow an external benchmark—most commonly the Bank of England base rate—plus or minus a margin.

How it’s usually affected by an interest rate increase

• If the base rate rises, the mortgage rate typically rises too, subject to the terms of your deal.
• The change may take effect after a short delay, depending on how the tracker is calculated.

What to watch

• Some tracker products include a cap (a maximum rate) or a collar (a range within which the rate can move).
• These features can limit how much your payments increase even when base rate rises.

Discount mortgages

A discount mortgage is usually priced as the lender’s SVR minus a fixed discount for a set period.

How it’s usually affected by an interest rate increase

• If the lender’s SVR rises, your discounted rate can still increase because your starting point (SVR) has moved.
• If the SVR falls, your discounted rate may reduce.

What to watch

• Discount deals are often time-limited.
• When the discount period ends, you may revert to the lender’s SVR unless you switch or remortgage.

Why your mortgage rate may not move one-to-one with base rate

Even when the Bank of England changes interest rates, the rate you pay can be influenced by other features of your mortgage and your lender’s pricing.

Loan-to-value (LTV)

LTV compares the mortgage amount to the property value.

• Higher LTV borrowing can be priced higher because lenders may view the risk as greater.
• Lower LTV borrowing can sometimes access more competitive pricing.

Your credit profile

Lenders assess the likelihood of repayment based on your credit history.

• A stronger credit profile can support access to a wider range of products.
• A weaker credit profile can lead to pricing that reflects additional risk.

Lender pricing and market conditions

Mortgage rates also reflect the wider market environment.

• Lenders set rates for new business based on funding costs, risk appetite and competition.
• That means your mortgage rate may not always mirror base rate changes exactly, even if base rate is a key driver.

How a Bank of England interest rate rise can affect your mortgage

A base rate increase can affect borrowers differently depending on whether their mortgage rate is linked to base rate or set by the lender.

If you’re on a fixed rate

• Your repayments are typically unchanged during the fixed term.
• The main question becomes what happens when your fix ends—your next rate could be higher depending on market conditions at that time.

If you’re on a tracker

• Your interest rate typically moves in line with base rate, subject to your deal terms.
• Repayments may rise after the base rate change, depending on the tracker’s calculation and timing.

If you’re on an SVR or discounted rate

• Your repayments may increase when the lender adjusts its SVR.
• The timing and size of changes can vary because they depend on the lender’s decisions.

Practical steps to consider if you’re worried about repayments rising

Interest rate changes don’t always require immediate action, but they do make it sensible to understand your position and timeline.

1) Identify what type of mortgage you have

Your mortgage documents or online account should show whether you’re on:

• a fixed rate
• a tracker
• an SVR
• a discounted rate

Knowing the type helps you understand how responsive your repayments are likely to be.

2) Check the end date of your current deal

For fixed-rate borrowers, the end date is often the most important milestone.

• Planning around when your deal ends can help you avoid an unexpected move onto a higher rate.

3) Revisit household budgeting

Even if changes are gradual, they can still affect monthly cashflow.

• Reviewing your budget can help you understand what higher repayments could mean.
• It can also help you spot where spending might need to adjust.

4) Consider how your mortgage could change over time

For some borrowers, the most significant impact may come later—such as when a tracker deal ends or when a discount period expires.

• Understanding what happens after the introductory period can help you prepare.

Buy-to-let landlords: what changes (and what doesn’t)

The underlying mechanics of interest rate rises can apply to buy-to-let mortgages too, but the overall impact may differ because landlord income and costs don’t always move together.

• If your buy-to-let mortgage is tracker-linked, base rate changes can feed through to your interest costs.
• If you’re on an SVR or discounted buy-to-let deal, changes may depend on the lender’s SVR decisions.
• If you’re on a fixed buy-to-let rate, your interest cost is typically stable during the fixed term.

Landlords may also want to consider how higher interest costs could affect cashflow, particularly if rental income doesn’t rise at the same pace.

Key takeaway

A Bank of England interest rate increase can raise mortgage costs, but how and when depends largely on your mortgage type:

• Fixed rates: usually stable during the fixed term; the impact often shows up when the deal ends.
• Trackers: typically move with base rate (subject to deal terms such as caps or collars).
• SVR/discount: can change when the lender adjusts its pricing.

Understanding your mortgage rate type and your deal timeline is the best starting point for preparing for potential repayment changes.