MORTGAGE costs will rise for many homeowners tomorrow as lenders react to higher interest rates.
The Bank of England (BoE) hiked the base rate by 0.25 percentage points earlier this month – and many banks and building societies are passing that on to borrowers.
In most cases, changes in mortgage costs come into effect on March 1.
And homeowners have been warned they should check their mortgage deal sooner rather than later to make sure they are getting the best deal, as the BoE is expected to hike rates further this year.
Many people were caught off-guard when the BoE's members voted to lift rates to 0.25% from a historic low of 0.1% in December 2021.
This was increased again to 0.5% in February, on the back of historic rates of inflation.
The BoE has a target rate of 2% for inflation and increasing the bank rate is a common lever for slowing down inflation.
If your mortgage is going to be affected it might be possible for you to shop around for a new deal.
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Will my mortgage costs increase?
You can use broker L&C Mortgages interest rate calculator tool to see how much a rate rise could cost you.
You won't pay more if you're on a fixed rate mortgage deal, as you've agreed your rate for a certain period of time.
But after your deal ends, you could find rates are higher than when you last fixed because of the latest hike.
For homeowners with a tracker mortgage linked to the base rate, your repayments will rise, but when this happens will depend on your lender's terms and conditions.
Some mortgage lenders have said they will increase standard variable rates (SVR) and others are "reviewing" theirs after the Bank of England's (BoE) decision.
SVRs are generally higher than fixed rate deals, so if you're on one then you're likely already be paying more than you need to.
And if your bank is putting up the SVR, you'll soon be paying even more unless you find a cheaper deal, which could cost you hundreds of pounds a year extra.
Which banks are affected?
In most cases, if your mortgage tracks the BoE base rate, it will automatically rise by 0.25 percentage points.
But some banks have also altered other rates.
Aldermore has said that it's SVR, known as the Aldermore Managed Rate (AMR), is rising by 0.25 percentage points from March 1 for existing customers.
That means the rate will go from 4.73% to 4.98%.
Barclays has said it will increase its standard variable rates from March 1, so its current rate of 4.74% will rise to 4.99% for homeowners.
Meanwhile, Lloyds Banking Group, which owns Lloyds Bank, Halifax and Bank of Scotland, said some rates are changing.
Halifax's Homeowner Variable Rate and SVR will both rise, from 3.74% to 3.99% from March 1.
Lloyds Bank Homeowner Variable Rate will rise too from 3.74% to 3.99% and Lloyds' SVR will rise from 2.25% to 2.50%, also on March 1.
Nationwide is putting up its rates from March 1 too.
That includes its Base Mortgage Rate (BMR) which will increase to 2.5%, and its Standard Mortgage Rate (SMR) which will rise to 3.99%.
Santander's Follow on Rate (FoR), which is a variable rate you revert to automatically after the end of a previous term, will increase to 3.75%.
The SVR at the bank, and at Alliance and Leicester will rise to 4.74% from the start of March.
How can I get the best mortgage deal?
Getting the best rate on your mortgage can depend on the rates available at the time, but there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan to value ratio has changed you may also be able to access to better rates than before.
A change to your credit score or a better salary could also help you get a more favourable deal.
If you're on an SVR, fixed deals are likely to be cheaper, so it's worth looking at the the options out there.
If you have a fixed rate, you could see higher rates when you come to the end of the current term after the BoE rise, either when you are shopping for a new fixed deal or reverting to the standard variable rate (SVR).
If you're nearing the end of a fixed deal soon it's worth looking now. You can lock in current deals sometimes up to six months before your current deal ends, and there are signs that interest rates may rise again before the end of the year.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what's available.
You can also got to a mortgage broker who can compare for you, but you may have to pay for this service.
It could cost a couple of hundred pounds but it might save you thousands on you mortgage overall.
You'll also need to factor in fees for the mortgage, though some have no fees at all, or you can add it on to the cost of the mortgage, but beware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
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