Interest rates are often the first thing people focus on when they think about a mortgage. That is completely understandable. Your interest rate directly affects your monthly payment and the overall cost of borrowing.
However, as we explain in Episode 5 of Home Made By The Lathams, interest rates are only one part of a much bigger picture.
Watch our video on Interest Rates here, and keep reading for a summary…
Why interest rates can feel confusing and emotional
Over the past few years, we have all lived through an unusually volatile period. Following the Covid lockdown era, interest rates were historically low. Many homeowners fixed their mortgages at rates we may not see again for some time. When rates started to rise sharply, it understandably caused anxiety for many people.
We have seen first hand how stressful this can feel, both professionally and personally. This is why we always encourage calm, informed decision making rather than reacting out of fear.
Why speaking to a mortgage broker matters before taking action
One of the most important points we cover in the video is the value of speaking to a broker before making any drastic decisions, such as remortgaging early or switching products in a rush.
A good broker will slow things down, not speed them up unnecessarily. We take the time to calculate your options properly, explain the costs involved, and talk through your risk tolerance. Sometimes staying where you are is the right choice. Other times, planning ahead is the smarter move. The key is understanding the impact of each option before you commit.
How the wider world affects mortgage interest rates
Interest rates do not move in isolation. They are influenced by what is happening in the world around us. Politics, global conflict, inflation, oil prices, and the overall economy all play a role.
These factors influence the Bank of England Base Rate, which in turn affects how lenders price their mortgage products. Even expectations about future changes can cause lenders to adjust rates before anything officially happens.
Bank of England Base Rate and swap rates explained simply
The Bank of England Base Rate is often mentioned in the news, but it is not the only thing lenders look at. Lenders also rely heavily on swap rates, which are based on forecasts of where interest rates are expected to go in the future.
This is why you may see mortgage rates change even when the Base Rate stays the same. It is also why reductions in the Base Rate are not always passed on immediately or in full.
How different mortgage types respond to rate changes
Tracker mortgages tend to react immediately to Base Rate changes. If the Base Rate goes down, your rate usually follows. If it goes up, your payments increase.
Fixed rate mortgages work differently. Your rate is fixed for a set period, which gives stability and predictability. The rate you are offered already reflects market expectations at the time you apply.
Understanding how your mortgage product responds to rate changes is essential, whether you are a first time buyer or an experienced homeowner.
Avoid becoming a rate chaser
We often see people trying to chase the lowest rate they can find, sometimes speaking to multiple brokers at the same time. This can actually create confusion rather than clarity.
Mortgage products can change daily. Having multiple conversations with different advisers can lead to mixed messages and unnecessary stress. Our advice is to choose one broker you trust, who has access to a wide range of lenders, strong expertise, excellent reviews, and a solid reputation.
A good broker does not just look for a competitive rate. They look for a suitable product that fits your circumstances and your future plans.
Why education matters when it comes to mortgages
At Zita Latham Mortgages, we strongly believe in financial education. Markets will always change. Rates will go up, down, and sometimes stay flat for a while. Panic helps no one, but understanding how things work puts you back in control.
Our role is not just to secure a mortgage for you, but to guide you through the process from start to finish, monitor your application, and move to a different product if a better option becomes available and timing allows.
Watch the full video for a deeper understanding
In this episode of Home Made By The Lathams, we talk through interest rates in a clear and honest way, using real experiences and practical examples.
If you are buying a home, remortgaging, or simply want to understand how interest rates affect your mortgage, we hope you find it helpful.
You can watch the full video here:
If you would like support with your mortgage or want to understand your options in more detail, we are always happy to help guide you through what to expect. Make sure you are subscribed to our YouTube channel for new videos and follow us on social media for regular updates and education.
