UK inflation rates are at a 40-year high, currently sitting at 10.1%. The consequences of this can be seen in our everyday spending, but it also can affect our longer-term borrowing as well. To try and compensate for this inflationary rise, the Bank of England raised the interest base rate to 2.25% in September.

This is the highest the base rate has been since 2008 and is already significantly impacting mortgage rates. With inflation only set to rise over the coming months, what can homeowners do to protect their ongoing mortgage payments?

Variable rate mortgages

Variable rate mortgages fall into three categories, standard variable rate (SVR), discounted rate and tracker rate. All of these variable rates can increase and decrease month by month, but with the current economic volatility, most are on the rise. This is because variable rate mortgages follow the interest base rate changes.

Whether you see a rise in your mortgage rate, then, will depend on the type of mortgage you currently have. Many homeowners have enjoyed over 10 years of low variable rate mortgages, but this is unlikely to continue. Now is a good time to shop around for fixed rate mortgage products to lock down the most competitive rates.

Fixed rate mortgages

A fixed rate mortgage is when the interest rate is locked for a set period of time and guaranteed not to change until the end of the term. Fixed rate terms are generally 2 to 10 years, but some providers are now offering much longer terms. The advantage of this in the current economic climate is that a fixed rate mortgage will be shielded from any further interest rate hikes that the Bank of England may make.

Locking down a competitive fixed rate mortgage can reduce your monthly repayments and make it easier to budget your expenses. If interest rates remain high for some time, a fixed rate mortgage can save a considerable amount over its term.

Be aware of when your fixed rate term is coming to an end

When a fixed rate term comes to an end, homeowners will usually be automatically transferred onto the lender’s standard variable rate if they have not remortgaged. Typically, SVR products offer the poorest rates, so it is important to be aware of when your fixed rate mortgage is coming to an end and shop around early to secure a new mortgage deal.

Get advice early

If your fixed rate mortgage is coming to an end, or you have found you are now paying more per month on a variable rate, it is best to seek advice from a financial adviser. A financial adviser can help you to find the most competitive mortgage rates on the market that will work with your personal circumstances and financial goals.

Grosvenor Wealth Management’s independent mortgage advice service ensures your mortgage requirements are fully met. Whether you are looking to purchase, re-mortgage or buy an investment property, we are confident we can secure the right arrangement for you.

PLEASE NOTE: Your mortgage is a loan secured against your property. Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. The information contained in within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.