How do rising interest rates affect me?

8th Jun 2023
David Gregory

The Bank of England recently announced that it has raised interest rates from 1.25% to 1.75% in a bid to slow inflation. In our latest article, we cover what affect this will have on the property market and mortgage rates not just in Brighton & Hove, but across the country.

The Bank also stated that it expects a recession to hit Great Britain next year – the first since 2008 – making the effect that higher interest rates will have on pensions and savings accounts even more important.

Mortgage Rates​

The average mortgage rate in Brighton & Hove, across the entire country in fact, are seeing record increases. The price of two-year and five-year fixed-rate mortgages are up 0.5% this month meaning the average mortgage for homes around £200,000 with a 25% deposit will increase by around £50pcm, but there are still many ways to save money.

One of them is to remortgage sooner to get ahead of further increases that may be implemented. It is important to remember that you may need to be a fee to break out of your current loan, but getting an attractive new rate should far outweigh this. In the current market, remortgaging can take anything from three to six months, so make sure you apply well before your existing deal runs out.

Another way to lessen the amount of possible debt caused by inflation and higher rates is to increase your monthly mortgage payments if you can afford to. Although this increases your short-term spend, your long-term interest payments will be reduced.

Heather Owen, a Financial Planning Expert at wealth management company, Quilter, says you should also move to a fixed-rate deal next time you remortgage, to avoid any further price hikes. If you’re wanting to stay in your home for a number of years, a long-term mortgage will allow you to lock in a rate now and sneak passed future price increases.

New And Existing Savings Accounts​

Higher interest rates are certainly good for one thing: your savings accounts! The increase means you should see a larger interest return on the money you’re storing away. Banks across the country offer varying rates, so do a fair bit of research before opening new accounts and aim to secure at least 1.75%. this is the BOE’s standard rate and should be available across the board.

Because stocks and bonds usually offer greater returns than savings accounts, some financial advisers suggest investing your money elsewhere or paying off other debt as long as you have a safety net in place. Savings accounts, however, still remain the most secure way of banking money towards your future aspirations, and these new higher interest rates will help you do just that!

Buying Homes In A Recession​

The BOE believes that a recession will hit the UK later this year and last the full course of 2023. This is a scary prospect for many, but should actually result in house price growth slowing down majorly. Huw Pill, the Bank’s Chief Economist, has said that higher interest rates will also help cool prices but are very unlikely to lead to a credit crash – which is fantastic news all round.

If you’re looking at getting on the property ladder or have already found the house of your dreams, buying sooner rather than later is still the best policy because mortgage rates will still continue to climb until the recession hits, according to Helen Morrissey who is a Senior Analyst at Hargreaves London.


If you’re looking to take out your pension, higher interest rates mean you will enjoy a better deal than you would have done a few months ago – a £100,000 pension pot now brings you an annuity income of around £5,800 a year, which is almost £1,000 more than in April 2021, financial service firm Hargreaves Lansdown say. This depends on individual circumstance, of course, but now is also a great time to cash in your annuity if you haven’t already. Make sure to look around for the latest offers before signing any long-term deals.

For more information on how the rise in interest rates affects you and your property, call your local branch or pop in to say hi today!

*Think carefully before securing debt against your home. Your property may be repossessed if you do not keep up with repayments on your mortgage.