What Happens to Your Mortgage If Interest Rates Rise?

It Depends on Your Mortgage Type

The impact of an interest rate rise on your mortgage depends entirely on what type of deal you're on. Not all mortgages are affected equally, and some aren't affected at all — at least in the short term.

Understanding your mortgage type is the first step to knowing how exposed you are to rate changes and what action, if any, you should take.

Fixed-Rate Mortgages

If you're on a fixed-rate mortgage, your payments stay exactly the same regardless of what happens to interest rates. That's the whole point of fixing — you've locked in your rate for a set period, and neither the lender nor the Bank of England can change it during that time.

However, when your fixed period ends, you'll need to remortgage onto a new deal. If rates have risen during your fixed period, the new deals available to you will likely be at a higher rate than what you were paying. This is why it's smart to start looking at your options well before your fix expires.

Tracker Mortgages

Tracker mortgages follow the Bank of England base rate directly, usually at a set margin above it. If the base rate rises by 0.25%, your mortgage rate rises by exactly 0.25%.

On a typical £200,000 mortgage, a 0.25% rate increase would add roughly £25-£30 per month to your payments. A full 1% increase could mean an extra £100-£120 per month. These increases happen automatically — you don't need to do anything, but your direct debit will change.

Standard Variable Rate (SVR)

If you're on your lender's SVR — which is the default rate you move to when a fixed or introductory deal ends — you're in the most vulnerable position. SVRs are set by your lender and are influenced by, but not directly tied to, the base rate.

Lenders almost always pass on base rate increases to SVR customers, but they don't always pass on decreases in full. SVRs are typically much higher than the best available deals, so if you're on one, you're likely already overpaying — and a rate rise would make things worse.

How to Protect Yourself

The single best thing you can do is make sure you're on the right deal for your circumstances:

• If your fix is ending soon — lock in a new rate now, up to 6 months in advance
• If you're on the SVR — explore switching immediately, you could save hundreds per month
• If you're on a tracker and worried — consider switching to a fix for payment certainty
• Build a buffer — having savings to cover a few months of higher payments gives you breathing room

Rate rises don't need to be a crisis if you're prepared. The worst thing you can do is nothing.