Their current mortgage payments will not change until the end of the fixed rate period stated in the mortgage offer. The mortgage payments are calculated using the fixed interest rate until the end of the fixed rate period.
Thereafter, in accordance with their mortgage terms and conditions, the interest rate applied to the mortgage account will revert to Bank Base Rate (BBR) + a margin (which is also stated in the mortgage offer). As BBR changes up or down, so will the interest rate applied to the mortgage account.
For example, if BBR rises to 1% and the margin stated in the offer is 4.99% per annum, the interest rate applied to the mortgage account would be 5.99%.
If BBR rises to 1.25%, using the same margin of 4.99%, the interest rate applied to the mortgage account will be 6.24% per annum.
Example 1:
If your mortgage interest rate is currently a fixed rate of 3.49%, which ends on 31st September 2022
£200,000 loan outstanding, on a fixed rate of 3.49% until 31st September 2022, calculated on an interest-only basis:
[payments may vary slightly based on fees and month]
May 2022 mortgage payment = £579.98
June 2022 mortgage payment = £579.98
July 2022 mortgage payment = £579.98
August 2022 mortgage payment = £579.98
September 2022 mortgage payment = £579.98
October mortgage payment (assuming BBR is 1% p.a and the margin is 4.99% p.a, the rate of interest would be is 5.99%) = £993.37
November 2022 mortgage payment (assuming no change in BBR meaning the interest rate applied to the mortgage account remains at 5.99%) = £993.37
The example above is shown for illustrative purposes only. Please be advised that there is no maximum rate to which the Bank of England Monetary Policy committee may set Bank Base Rate.
To calculate a monthly mortgage payment based on the borrower’s current fixed rate, you can access the calculator here https://www.foundationhomeloans.co.uk/payment-info/payment-calculator/. The borrower’s fixed rate is on the latest mortgage statement. [payments may vary slightly based on fees and month]
What if my fixed rate has ended?
If the borrower’s fixed rate has already ended, the borrower’s mortgage now references the Bank of England Base Rate.
Examples: £200,000 loan outstanding, on the Foundation Home Loans standard variable reversion rate 4.99% + Bank Base Rate (BBR), calculated on an interest-only basis:
Mortgage payment (assuming BBR is 0.75% so Foundation RR is 5.74% = £952.11
Mortgage payment (assuming BBR is 1% so Foundation RR is 5.99%) = £993.37
Mortgage payment if BBR rises to 1.25% so Foundation RR is 6.24%) = £1,034.62
Please be advised that there is no top limit to the rate to which the Bank of England Monetary Policy committee may set Bank Base Rate.
Please note that these examples do not include any additional fees which the borrowers may have added to their loan.