Use this **Mortgage Interest Rate Increase Calculator UK** to quickly estimate how a change in the Bank of England’s base rate, or a new fixed rate, will impact your monthly mortgage payments. This tool helps homeowners assess affordability ahead of a remortgage or rate review.
Mortgage Interest Rate Increase Calculator UK
Mortgage Interest Rate Increase Calculator UK Formula
The calculation uses the standard mortgage annuity formula to find the monthly payment ($M$), and then finds the difference ($\Delta M$).
$$ M = P \frac{r(1+r)^n}{(1+r)^n-1} $$
$$ \Delta M = M_{new} – M_{current} $$
Where:
- $P$ is the Principal Outstanding.
- $r$ is the monthly interest rate ($R / 1200$).
- $n$ is the remaining term in months.
Variables Explained
- Remaining Mortgage Balance ($P$): The total amount you still owe on the mortgage, excluding future interest.
- Remaining Mortgage Term (Years): The number of years left until the mortgage is fully paid off.
- Current Annual Interest Rate ($R_1$): The current percentage rate you are paying (e.g., fixed or tracker rate).
- New/Expected Annual Interest Rate ($R_2$): The new rate you anticipate paying after a rate change or remortgage.
Related Calculators
- UK Mortgage Affordability Calculator
- Mortgage Overpayment Savings Calculator
- Remortgage Comparison and Cost Calculator
- Fixed Rate vs. Tracker Mortgage Calculator
What is a Mortgage Interest Rate Increase Calculator UK?
This calculator is designed specifically for the UK housing market, where rate changes—often driven by the Bank of England’s Base Rate—can significantly impact household budgets. It determines the difference between your current required monthly payment and what your new payment will be, assuming the principal and remaining term stay the same.
Understanding this difference is crucial for borrowers on Standard Variable Rate (SVR) mortgages or those whose current fixed-rate deals are ending soon. A small percentage point increase can translate to hundreds of pounds extra per month, making forward planning essential for household budgeting and remortgaging decisions.
How to Calculate Mortgage Interest Rate Increase (Example)
- Establish Current Payment ($M_1$): Find the current monthly payment for a £150,000 balance over 10 years at 2.0% annual interest.
- Establish New Payment ($M_2$): Calculate the new monthly payment for the same £150,000 balance over 10 years, but at a new rate of 5.5%.
- Determine the Difference: Subtract the current payment ($M_1$) from the new payment ($M_2$). For instance, if $M_1$ is £1380 and $M_2$ is £1620, the increase is £240 per month.
- Review Affordability: Use the calculated change (£240) to update your monthly budget and ensure the mortgage remains sustainable.
Frequently Asked Questions (FAQ)
What is the Bank of England Base Rate?
The Base Rate is the interest rate the Bank of England charges commercial banks. It is the primary tool for managing inflation and influences the rates offered on UK savings accounts and, crucially, variable and tracker mortgages.
How often do UK mortgage rates change?
Fixed rates only change when your deal expires (typically 2, 3, or 5 years). Variable rates (SVR or tracker) can change immediately following a decision by the Bank of England or at the lender’s discretion.
What is the difference between Annual Rate and Monthly Rate?
The Annual Rate is the quoted percentage (e.g., 5.0%). The Monthly Rate is the annual rate divided by 12, which is used in the payment formula to calculate the exact interest accrued each month.
Can I lock in my new rate before my current deal ends?
Many UK lenders allow you to “product transfer” or secure a new fixed rate up to six months before your current deal expires. This calculator helps you see the impact of that new rate immediately.