What will an interest rate rise mean for your mortgage?

MILLIONS of homeowners are facing mortgage payment hikes after an interest rate hike was confirmed.

The Bank of England has upped interest rates from 0.25% to 0.5%, it announced today.

It comes after the central bank lifted rates from 0.1% to 0.25% in December, and some experts think they could hit 1.25% by the end of 2022.

The decision to hike rates is in response to soaring inflation, which measures the cost of living.

It is currently at a 30-year high after being driven up by rocketing energy costs and food prices.

Increasing interest rates will help to slow down inflation.

The move will increase the cost of borrowing, meaning consumers have less money to spend.

This then reduces demand for goods and services, which should push prices back down.

But it could also have an impact on your mortgage repayment rates, depending on what type of loan you have and when your deal ends.

Homeowners with a variable rate tracker mortgage, which is linked to the Bank of England base rate, are likely to see an immediate rise when interest rates are hiked.

If you're on a standard variable rate mortgage, you'll probably be hit with an increase in the rate of your repayments.

Your lender will decide how much so it could be more or less than the Bank of England increase.

Those on a fixed rate mortgage won't notice an immediate increase but they're likely to be affected when their current deal ends.

The rise could make it more expensive to remortgage in the future.

You can find out what kind of mortgage you've got by checking the terms and conditions on your original agreement.

Rising interest rates will have an impact on other types of borrowing, too.

If you have credit card debt or an overdraft, you could be charged more interest.

But it's not all bad news as savers could earn more interest on their variable rate accounts and cash Isas.