Interest rates and mortgages – which one could be right for you?

The base rate is set by the Bank of England to try to control inflation. They have a government-set target for inflation at 2%. When inflation rises, as it has done in recent years – reaching a peak of 11% in 2022 – the Bank of England raises the base rate to try to control it. These increases have led to rises in mortgage rates because they inform the cost of lending.

One of the biggest differences between the UK and other countries is how long a mortgage borrower can agree to ‘fix’ the interest rate they pay. For example, in the US, the majority of borrowers fix a rate for the entire term of the mortgage, up to 30 years. While in the UK, borrowers will have to rearrange their mortgage agreement by ‘remortgaging’. UK borrowers typically remortgage every two, five or ten years across the term of their mortgage.

Coutts Fixed Rate Mortgages run over two, five and ten year periods. These products offer budgetary certainty for a set period of time because the interest you pay is at a fixed rate. However, if the Bank of England reduces the base rate, the interest rate you pay will not change.

A fixed rate could be helpful for planning your finances and your budget towards investments and other opportunities.

However, there are also potential early repayment charges if you want to pay off more than 10% of the outstanding amount you’ve borrowed.

Coutts Tracker Mortgages run over two and five year periods. They reflect a margin we set above the Bank of England base rate. Consequently, every decision made by the Bank of England to move the base rate up or down is reflected in the interest rate you may pay on a monthly basis. The Coutts base rate has historically moved in line with the Bank or England base rate – though we reserve the right not to do so in future.

A tracker mortgage could allow you to benefit from rates if they drop with the base rate. Trackers also allow you flexibility to repay your borrowing at any time without incurring early repayment charges.

Coutts House Mortgage Rate is the product your borrowing will move to if either your fixed or tracker mortgage expires before you remortgage, and if your mortgage has a sufficient underlying term remaining. While the rate is set by us, it is influenced by the base rate, so you might see fluctuations in your mortgage repayments if the base rate changes. The house mortgage rate may have a higher margin than our other mortgage products.

If you’re on a Coutts mortgage product which is about to revert to a Coutts House Rate Mortgage, please be aware that there may be cheaper options available to you. Your private banker is on hand to discuss these with you today.

Other options – Depending on your circumstances, you might also be able to take advantage of other products such as our Coutts Mortgage Reserve Account, Mortgage Offset and Development Finance, dependent on meeting criteria. You can speak to your private banker to learn more about these.

At Coutts we don’t advise based on the outlook for interest rates (it can be hard to predict the future). We advise you based on what’s best for you. Whether you choose a fixed rate to pay back or a base rate tracker to pay back, the term will be structured around your means of repayment and your desire for either budgetary certainty or flexibility.

To do this we take into consideration every aspect of your finances, such as complex income sources, foreign currency or wide-ranging balance sheets. Because of this we may be able to offer a blended product suite or repayment profiles – for example, to match liquidity events at different times, balancing your budget, your range for flexibility and the overall cost of your mortgage.

Where appropriate, you could also have the option of only paying the interest. This could reduce outgoings for a period – but be aware this can be a more expensive repayment route over time.

Your home or property may be repossessed if you do not keep up repayments on your mortgage. Over-18s only. Terms and conditions apply.

You may not be eligible for all Coutts Green Mortgage Products. Security may be required. Product fees may apply. Subject to status.