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Mortgage Interest Rates Update – February 2023

Today (2nd February 2023), The Bank of England has voted to raise its base interest rate for the 10th consecutive time. This new interest rate of 4.0% equals the highest rate in 14 years, with an increase of 0.5%.

Reports about the Money Policy Committee meeting indicates we may have hit a peak in increases, though this remains to be seen. These reports also suggest 7 of the 9 committee members voted to increase the rates again, in an attempt to battle spiralling inflation.

The impact on mortgages will be notable, as mortgage interest rates have already been steadily increasing over the last 12 months. Rates are expected to level out later in 2023, though of course many factors can affect whether this will be the case.

Both those with current mortgages and new borrowers will be hit with higher rates after today’s announcement. This latest 0.5% increase is likely to equal an extra £55 per month on mortgage repayments (on average). This leaves many people questioning what to do next with their mortgage and just how high costs might rise in the coming months.

Will my mortgage be affected and what should I do?

Whether a new borrower or someone with a current mortgage, the likelihood is you will see increasing costs due to this latest announcement.

Around 150,000 borrowers on fixed rate or discount rate mortgages are expected to be facing the end of their deal within the first quarter of this year. With a move onto their lenders standard variable rate (SVR) looming, this could mean a sudden increase in monthly repayment costs.

A remortgage could be a good option, allowing you to lock in a new fixed rate deal before any potential further rate rises.

Our mortgage expert, Craig Heyward says “Of course, though increased mortgage rates are not good news for borrowers there are still some positives. Several lenders have actually lowered their rates in the last few days for their fixed rate deals, so there are definitely still some good options available for borrowers. There are many things that can affect mortgage rates moving forwards, but long-term forecasts are definitely more positive, with less interest rate rises expected from mid-2023 onwards.”

Speak to one of our highly qualified mortgage specialists to talk through the best options for your mortgage.

Learn more about FIXED RATE mortgages and DISCOUNT RATE mortgages in our dedicated mortgage guides.

How will the 0.5% increase impact my mortgage?

In recent years more and more borrowers have opted for variable rate mortgages. These mortgage types offer flexibility and can be appealing, particularly when interest rates are low.

However, if you are currently on a variable rate mortgage (including tracker and discount rates), you will now be facing higher monthly repayments.


Below we have some examples of how a 0.5% increase would affect a variable rate mortgage.

Mortgage amount£220,000
Mortgage term30 years
Mortgage typeRepayment mortgage
Previous interest rate3.5%
Previous repayment amount£988
New interest rate4%
New mortgage repayment£1050
Payment increaseIncrease of £62 per month/£744 per year
Mortgage amount£150,000
Mortgage term25 years
Mortgage typeRepayment mortgage
Previous interest rate3.5%
Previous repayment amount£751
New interest rate4%
New mortgage repayment£792
Payment increaseIncrease of £41 per month/£492 per year
Mortgage amount£160,000
Mortgage term25 years
Mortgage typeInterest only mortgage
Previous interest rate3.5%
Previous repayment amount£467
New interest rate4%
New mortgage repayment£533
Payment increaseIncrease of £67 per month/£804 per year

Will mortgage interest rates continue to increase in 2023?

It is predicted the next meeting of the Bank of England will lead to another interest rate increase of between a further 0.25% and 0.5%.

Economist’s predictions have been shaped by a variety of factors including decreasing energy costs. The UK is facing a significant recession and many reports project a slow recovery for our country’s economy.

There is no exact science to these speculations and economic factors and external circumstances are constantly changing. We could even see rates remain steady at 4.0% but whether this will happen cannot be guaranteed.

Useful resources

Bank of England – Interest Rates and Bank Rate

Bank of England – Official Bank Rate history

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