Bank of England Base Rate
Making additional payments
While the Bank of England Base rate remains low you may want to consider making additional payments to your mortgage.
Making additional payments will reduce the amount you owe and the amount of interest we charge because we calculate interest on the reduced balance from the day we receive the overpayment. It could also reduce the impact of future interest rate increases on your mortgage payments.
Fixing your mortgage interest rate
If you would like the security of knowing that your interest rate won't change for a set period of time, even if the Bank of England Base rate and our lender variable rates go up, you could consider switching to a fixed rate mortgage - see our latest products and find out how you can apply.
With some types of mortgage products, there may be an early repayment charge if we agree to transfer all or part of your loan to a new product during the early repayment charge period. You should check your mortgage offer or latest mortgage statement for details of any early repayment charges you may have to pay.
- Firstly we'll review our variable rates and decide what changes we will be making
- For our existing mortgage customers any change in interest rate will usually take effect from the 1st of the month following the Bank of England's announcement
WHAT HAPPENS WHEN THE BANK OF ENGLAND ANNOUNCE A RATE CHANGE?
If your mortgage is affected we will write to you to tell you about the change to your interest rate and monthly payment ahead of your monthly payment due date. We'll change the interest rate on tracker rate mortgages with effect from 1st of the month following a Bank of England change.
HOW IS MY NEW MONTHLY PAYMENT CALCULATED?
Where your mortgage is made up of sub-accounts, we look at each sub-account separately and change the monthly payment only on sub-accounts affected by the change. This may mean that some and not all sub-accounts get a monthly payment recalculation.
Mortgages on daily interest
- For repayment sub accounts - We work out what you owe on the day we recalculate your monthly payment. We add this to the amount of interest we expect will be charged to the end of that month. Then we take off the amount of any arrears that you owe, which you will have to pay separately.
- For Interest Only sub accounts - We work out what you owe on the day we recalculate your monthly payment. We add this to the amount of interest we expect will be charged to the end of that month.
- We work out how many months remain to the end of the mortgage term starting from the following month and then work out what your new payment should be.
- However, if we receive your monthly payment after we recalculate, it will mean the recalculated payment amount will be higher than it needs to be. If this happens and you would like us to recalculate your monthly payment, you can contact us.
Some customers with older mortgages have interest calculated on a monthly or annual basis. We recalculate the payments on these mortgages differently. If you think you are on monthly or annual interest and would like more information, or you would like to switch to daily interest, please contact us.
For interest-only mortgages, you pay only interest during the term of your mortgage and pay a lump sum at the end of the term to pay off everything else you owe. To calculate your monthly payment, we take the amount you owe on the day we do the recalculation together with how much we think interest will be to the end of that month. We then calculate a monthly payment at a level that pays the interest-only on this amount taking into account any interest rate change.
Where part of your mortgage is repayment and part interest only, each method will apply to the part concerned.
IF INTEREST RATES GO UP
WHY IS MY MONTHLY PAYMENT COMING DOWN WHEN THE INTEREST RATE IS GOING UP?
If you've made overpayments since the last time we recalculated your monthly payment, they will be included the next time your monthly payment is recalculated. This means your balance will have been reduced by the overpayment amount and your new monthly payment could be lower even though the interest rate is going up.
WHAT IF PART, OR ALL, OF MY MORTGAGE IS ON A FIXED RATE?
If your mortgage is on a fixed rate of interest, then the interest rate on the part that is fixed won't change. When the fixed rate comes to an end, we will calculate a new monthly payment at the new variable interest rate that applies at that time.
I HAVE JUST ARRANGED TO TAKE OUT ADDITIONAL BORROWING. HOW WILL THE RATE CHANGE AFFECT ME?
Any additional borrowing you have arranged on a fixed rate of interest will not change as a result of a change to our variable mortgage rates.
If you have arranged additional borrowing at a variable rate any offer will show the interest rates that applied at the time the offer was produced. If we change the variable rate after the offer is issued, we won't write to you until you complete. When you complete, the letter will contain a new monthly payment and interest rates that will apply.
I HAVE ARRANGED TO SWITCH TO A NEW FIXED RATE PRODUCT. HOW WILL THE RATE CHANGE AFFECT ME?
Any product switch you have arranged will be on a fixed rate of interest and this will not change as a result of a change to our variable mortgage rates. However, there may be part of your existing mortgage being charged at a variable rate. We will recalculate the monthly payment on any parts of the mortgage being charged interest at a variable rate and add these to the monthly payments on any fixed rate parts to give you a total new monthly payment.
I HAVE ARRANGED TO SWITCH TO A NEW FIXED RATE PRODUCT AND I DON'T WANT IT NOW. WHAT CAN I DO?
If you have arranged to switch to a new fixed rate product and the new rate hasn't yet taken effect, you can contact us and tell us that you have changed your mind. If the new rate already applies, you can still change your mind as long as you tell us within 28 days of the new rate taking effect.
WHAT IF I FIND IT DIFFICULT TO PAY MY MORTGAGE?
If you are currently finding it difficult to pay your mortgage and believe you may be facing into financial difficulties please don't ignore the problem, there are ways we can help.
Our tracker rates are linked to the Bank of England base rate that is administered by the Bank of England. If you are an existing customer you may be on a tracker rate linked to the Bank of Scotland base rate that is administered by the Bank of Scotland. Both rates can go up or down which will impact the cost of your mortgage payments.
If you are paying interest at one of our lender variable rates, your mortgage payments are likely to be affected by changes in these rates. It's important to note that the changes we make to our lender variable rates may not change in line with or at the same time as the change to the Bank Rate, as other factors can also influence the rates that we set.
If you have a fixed rate mortgage, a change in the Bank Rate will not affect the fixed interest rate during the fixed rate period. However, the interest rate you move to after the fixed rate period ends (the lender variable rate) is variable and therefore could be subject to changes in the Bank Rate.
If part of your mortgage is on a fixed rate and part on a variable rate, any interest rate change will only affect the part of your mortgage on a variable rate.
To help you understand how a change in interest rates might affect your monthly payment, use our Rate Change Calculator to get an idea.