20 August 2015

What would it mean for you if interest rates went up?

The UK economy has seen interest rates held at record low levels for more than six years. This means many mortgage holders have never seen the interest rates on their mortgages rise, even when their original fixed rate deals expired.

In recent months though, financial experts have warned that the Bank of England base rate of 0.5% is unlikely to be around forever. Bank of England Governor, Mark Carney, commented: “In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.” The credit rating agency Moody’s expects this to happen by the middle of the year.

Why raise interest rates?

The Bank of England’s decisions about interest rates are based on factors such as inflation, economic growth and unemployment.

It might seem strange for people to be talking about raising interest rates when the rate of inflation in the UK is so low (it fell back to 0% in June) as a result of a steep drop in the global oil price in late 2014 among other reasons. However, the Bank of England’s decisions are also swayed by what it thinks will happen to inflation in the future, which will depend on their view of the economy.

Is the UK economy growing?

The UK economy made a slowish start to 2015, but figures from the Office of National Statistics, show that it grew by 0.7% in the second quarter of the year, which means that it is back to pre-credit crunch levels. A stronger economy supports the case for raising interest rates.

So what does this all mean?

None of these things mean that interest rates are certain to rise during the next year or so. There are plenty of economists, including some at the Bank of England, who worry about the negative impact of raising interest rates too soon. Unexpected factors could hold back economic growth and make an interest rate rise less likely. However if things were to stay roughly as they are then it seems likely that record low interest rates could finally come to an end at some point.

This makes it important to look at all areas of your finances and think about what impact a change in interest rates could have. If your mortgage is currently on a Standard Variable Rate (SVR) then it’s likely that the rate you pay will rise if the base rate does.

What can you do to prepare if you are concerned about rising interest rates?

Did you know that if you’re an existing Nationwide mortgage customer you'll always be offered our best rates if you choose to switch to a new deal with us. Our Loyalty Rate Mortgages initiative means we’ll shop the high street* and beat the rates offered by other high street lenders (subject to terms and conditions) to help take the hassle out of switching to a new mortgage deal.


Mortgages are available to UK residents, aged 18+. Subject to underwriting and criteria.

*High Street lenders include Barclays/Woolwich, Halifax, HSBC, Lloyds, NatWest/RBS and Santander. These six providers are fixed for the year and we review them on an annual basis each September.

Nationwide is not responsible for the content of external websites or apps. Reference to any organisations' websites or apps is not an endorsement of that website or app or the organisations' products or services.

The content displayed on our recent news and articles page is for information purposes only, and is accurate at the time of publication. The information will not be maintained, and so we cannot guarantee that at any given time the information will be up to date or complete. Please verify any information you take before relying on it.

Nationwide is not responsible for the content or availability of external websites. Nationwide does not make any recommendation or endorse any advertising, products, services or other content on such external websites. Views expressed on third party websites are those of the public and unless specifically stated, are not those of Nationwide.

Most popular

The Budget 2017


Chancellor Philip Hammond presented his first – and last – Spring Budget to Parliament yesterday. Here’s your easy guide to the changes.

You may also be interested in...

Our helpful guides

We've created a range of helpful guides to help you make better financial decisions regardless of your circumstances. Find out more about owning property, growing wealth and planning for life events.

Our products

Whether you are after a current account, a savings account or even looking for a mortgage, Nationwide has a range of great products that could help you, no matter the situation.