How will the interest rate rises affect my mortgage?

The Bank of England has raised rates by 0.25%. Here we aim to help you understand its potential repercussions on your property portfolio.

As mortgage rates could change over the next quarter in reaction to the Bank of England decision, your mortgages payments are also likely to increase in line with this. For example, for an average size property of £90,000 where the 5% interest rate increases 0.25% to 5.25%, you will move from paying roughly £375 to £394 per month or an extra £227 each year.

What to do to protect your business

If you are concerned about the effect rising interest rates will have on your business there are a number of finance options you could consider to help protect your business.

1. Switch to Fixed Rate Mortgages
As payments on variable/discount rate mortgages will rise in line with interest rates you should consider switching to fixed rates to insure against further rate increases.
Commercial Mortgages | Buy-to-Let Mortgages

2. Utilise "Drop-Lock" Rates You could also consider a 'drop-lock' mortgage rate which gives you the benefit of a variable rate but additionally provides the option to fix the rate when it is convenient for you.

Commercial Mortgages | Buy-to-Let Mortgages

3. Consider Offset Mortgages By switching to an offset business mortgage, where the interest on your mortgage is reduced by the funds in your business current account, (just like residential offset mortgages), you can reduce the capital that you pay interest on your mortgage, effectively counteracting interest rate rises.

Commercial Mortgages | Buy-to-Let Mortgages

4. Consider Leasing Bank loans and overdrafts offer variable rates which will be affected by rising interest rates. A more attractive form of finance for you business needs is leasing where rates are fixed for the term of the lease.
Lease Finance

5. Maximise Your Account Receivables While considering the risks to your business posed by rising interest rates, you should also consider the effect it may have on other companies you deal with. Check your account receivables for poor creditors and utilise professional debt collection companies if necessary to ensure you receive amounts payable before it is too late.
Debt Collection