Why are mortgage rates rising, and what happens next?

Your mortgage is one of the biggest financial commitments you’ll ever make. Whether you’re taking that first step into homeownership, or your current deal is ending and you’re searching for your best option, you need to ask the important questions and develop a clear understanding of the current situation.

Freelancers looking at mortgage documents

Mortgage rates recently reached a 14-year high, with the average rate for a five-year fixed deal now a significant 6.51%. Most financial experts agree that these rates aren’t coming down anytime soon. In fact, another Bank of England (BoE) base rate increase is expected shortly, and this will push interest rates up even higher.

In a complex and clouded economic situation like the one we’re faced with in 2022, it’s essential to be fully informed. Especially as a self-employed professional with a potentially fluctuating income and a reduced safety net compared to the average employed person.

This article details five essential questions about your mortgage that you need to ask in the current climate. Read on, and get the answers you need to make the right financial decision.

1. Why is this rate rise happening?

Across the world, the BoE and other core financial institutions are working hard to try and curb inflation, which has been pushed to record highs by supply chain disruptions and economic issues from several sources.

In battling to bring down inflation, the BoE has been forced to increase the base rate several times over the last six months, and interest rates in the UK (and the wider world, as other banks have done the same) have spiked as a result.

2. What might happen to my mortgage next?

Until things can settle for the global financial markets, they are unlikely to settle in the UK. According to forecasting experts, mortgage rates will continue to rise for the foreseeable future.

It has also become harder to find a good mortgage deal, as many lenders have been prompted by economic uncertainty to pause or scrap some of their products and packages. This, combined with hiked prices and rates, reduces available options.

If you’re not yet a mortgage holder, it will be tougher to become one in this climate – though not impossible! If you have a mortgage, you can expect your monthly repayments to increase. (If you’re on a variable rate plan, they probably already have, and if you’re on a fixed rate plan, they likely will when this plan comes to an end – especially if that end is coming soon.)

3. Can I afford the worst-case scenario?

This is the essential question to ask yourself as you consider your mortgage and situation. There is a reasonable range of outcomes, but at the worse end are some that will see you paying more, borrowing more, accumulating more debt, and perhaps even facing repossession.

Can you afford the changes that might come, and if not, what can you do to prevent a worst-case scenario? Should you consider downsizing to reduce your mortgage amount, for example?

4. Is this the right time, or can I wait?

There’s not one second in this life when the economic situation is 100% certain, and absolutely nothing is going wrong across the globe. But 2022 might feel particularly uncertain and inauspicious, and it might lead you to ask yourself, ‘Is this even the right time to be looking for a mortgage?’

Only you can honestly answer this question because only you know your priorities and plans for the future. You might put yourself in a better situation if you wait it out. Experts say things could stabilise in approximately three years.

5. What is the worst-case scenario if I wait?

Yes, some financial experts say that things could stabilise in a few years and that if you wait to procure your next mortgage until this time, you’ll be in a better position. But how many financial experts anticipated COVID-19? Or Russia declaring war on Ukraine?

When you bet on the future, you can’t be sure of the outcome. If you find a mortgage deal now, you’ll at least know what you’re working with.

Consider the worst-case scenario in terms of your mortgage and repayments, but also consider the worst-case scenario if you don’t act and the market continues on its current trajectory for another decade. Will you regret not buying a home when you could?

For more advice on managing your money and mortgage as an independent professional, don’t wait to reach out. Get in touch today, and we’ll show you how much our organisation helps its members.


IPSE Partner, CMME, is a leading Contractor Mortgage specialist, dedicated to supporting Britain’s freelancers, contractors and self-employed professionals – ambitious, enterprising people like you who’ve backed themselves to make their own way in life.


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