Here’s what the interest rate hike could mean for your mortgage

If you have a mortgage, you will have heard about the interest rate increases. The rate is at its highest level in 14 years. According to the BBC, more rate rises are likely to come, but there is a widespread belief that these may end by the middle of the year. But what does this mean for your mortgage?

What has the Bank of England increased the base rate to?

As of 2nd February 2023, the base rate has been increased to 4% and this is now the 10th time in a row that the Bank of England (BoE) has raised it.

Why are interest rates going up?

Also known as base rates, the interest rates going up is all part of a bigger plan. By hiking interest rates, it makes it more expensive for people to borrow money. This in turn encourages people to save money, driving down the demand for goods and services with the end goal of lowering inflation.

How could the interest rate rises affect you?

If you have a loan or mortgage that charges you a variable interest rate, you may be financially affected straight away, as the cost of your repayments are likely to go up.

If you have savings in a bank account that pays interest, you might see interest rates on your savings go up.

Why is a mortgage life insurance policy a good idea?

Getting a life insurance policy to protect your mortgage is one of the first things you should do when you take out your mortgage.

Without the right policy in place, your loved ones could be at risk, if you were to pass away. The outstanding debt of your mortgage could cause financial strain on the loved ones you’d leave behind, if you were to pass away unexpectedly.

It's worth remembering, if you do not keep up your repayments on your mortgage, your home could be repossessed.

What about fixed rate mortgages?

The increased interest rates in the UK shouldn’t affect your fixed rate mortgage until you come to the end of your fixed rate term.

When your fixed rate mortgage comes to an end, you will have a few different options of what to do with your mortgage moving forward.

*You can either move to your current lender’s standard variable rate (SVR), re-mortgage with a new lender, or switch to a new mortgage deal with your current mortgage provider.

Don’t leave your loved ones behind

Depending on which type of mortgage you have, we can tailor a life insurance policy to cover your remaining balance. We can help you take out a decreasing life insurance policy to cover your repayment mortgage or a level term life insurance policy to cover your interest-only mortgage.

A life insurance policy that covers your mortgage could make all the difference if the worst were to happen.

What can we do?

At Busy Bee Life Insurance, we look at your wants, needs, and type of mortgage to be able to recommend the best cover for you and loved ones. Protecting your loved ones with a life insurance policy is one of the most important things you can do if you have a mortgage.

The lump sum from your mortgage protection policy could help your loved ones pay the outstanding balance of your mortgage. Click the button below to get started with your free life insurance quote today.

*It is always advisable to obtain independent mortgage advice and to do this you can use this link: https://www.unbiased.co.uk/