Four practical mortgage options to consider if your interest rate is going up

As interest rates rise, many people are facing an increase in their monthly mortgage repayments. Here are four options to consider if you’re one of them.

Interest rates somewhat dominated headlines in 2022, and now that we’re more than halfway through 2023, little has changed.

Indeed, after lowering the base rate to just 0.1% in March 2020 following the arrival of the Covid-19 pandemic, the Bank of England (BoE) has since raised it 13 times in a row. Most recently, they increased the base rate from 4.5% to 5% in June 2023.

This continued rise, coupled with the economic volatility the UK experienced in 2022, has had a knock-on effect on mortgages. In fact, the Office for National Statistics (ONS) found that mortgage repayments on the average semi-detached house rose by 61% in 2022.

This may come as no surprise – according to Moneyfacts, the average five-year fixed-rate mortgage carried a rate of 2.25% in July 2020. In July 2023, Moneyfacts now reports that the lowest rate available on a five-year deal is 5.69%.

Overall, rising interest rates are likely to have an effect on your debt, particularly if you are about to remortgage your fixed-rate deal, or if you are on a tracker- or variable-rate mortgage now.

Read on to find out four mortgage options to consider if your interest rate is set to increase.

1. Increase repayments on your mortgage

Although it may seem counterintuitive, increasing your monthly mortgage repayments could come in useful if you are anticipating an interest rate rise soon – regardless of the type of mortgage you have. Doing so could mean it takes less time to pay off your mortgage overall.

In fact, overpaying could have even more benefit if your interest rate goes up. When interest is high, increasing your contributions could help to reduce the amount you owe faster.

The below table shows the potential benefit of increasing your repayments in a time of high interest. 

Interest rate



Monthly repayments



Additional monthly overpayment



Amount saved



Term mortgage is reduced by

5 years

6 years

Source: Halifax

To see how much you can overpay without being charged an early repayment charge (ERC), check the terms of your specific mortgage deal.

2. Pay a large chunk of your mortgage off at once

If your interest rate is set to rise soon, you may be considering paying down a lump sum against your mortgage loan on your current lower rate.

You may do this by:

  • Drawing upon cash savings
  • Releasing capital from your investment portfolio
  • Taking money from your pension fund
  • Using any inheritance you have received (or another similar windfall).

Paying off a significant portion of the loan would reduce the amount left to pay by the time your rate increases. This might help to soften the impact of a higher interest rate on your monthly repayments.

While this could be a beneficial move, be aware that ERCs may apply when paying off some or all of your mortgage as a lump sum. In some cases, you could pay an additional 5% or 10% in ERCs, so it’s important to check the small print and include this in your budget.

In addition to this consideration, it’s crucial to think about how using a sizeable sum to pay off your mortgage could affect your finances down the line. Make sure that you’ve factored in the loss of this capital from your retirement fund, for instance – your Kellands financial planner can help with this.

This being said, using savings or investments to cut your mortgage by a significant amount could mean your monthly outgoings are not too harshly affected when your interest rate rises.

3. Remortgage on a short-term fixed agreement

If your deal is ending soon and you’re looking at remortgaging options, one way to diffuse the long-term effect of high interest is to remortgage on a short-term deal.

For instance, if your current agreement is a five-year fixed-rate loan, you could opt for a two-year mortgage deal next time.

The interest rate on a two-year fixed agreement may be higher than on a five-year deal – for instance, Moneyfacts says that as of 19 July 2023, the lowest existing remortgage rate for a two-year deal is 5.69%, whereas five-year agreements are available with a rate of 5.08%.

Nevertheless, accepting a higher interest rate for a shorter term could be beneficial down the line. In two years’ time, you can assess the deals available and perhaps secure a mortgage with a more affordable rate.

While there is no guarantee of lower rates in two years’ time, accepting a short-term rise could bring you peace of mind that these more expensive repayments may not last too long.

4. Discuss your mortgage options with a Kellands financial planner

Needless to say, assessing your mortgage options in a time of high interest can be a little overwhelming.

If you have a large mortgage loan, an increased interest rate could hike your repayments steeply. Fortunately, your Kellands financial planner is on hand to guide you through all the options available.

By discussing your mortgage situation with a financial planner sooner rather than later, we can help ensure you are ready for any further increases to your monthly outgoings and factor this into your long-term financial plan.

Get in touch

To talk through your mortgage options, email us at, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Buy-to-let (pure) and commercial mortgages are not regulated by the FCA. Think carefully before securing other debts against your home.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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