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In July, the three key European Central Bank (ECB) interest rates were raised by 50 basis points. This is the ECB’s first interest-rate increase in over a decade and the decision was based on the latest assessment of inflation risks. Unfortunately, more increases are likely in the coming months too.

Hearing news like this can be concerning if you’re planning to buy a new property or you need to re-mortgage and you may be wondering what this interest rate hike means for your future mortgages. To help put your mind at ease and to give you an insight into how the new ECB rates may affect your next mortgage application, our mortgage brokers at Mason Wealth Management have answered some of the most common questions our clients are asking.


How Will the ECB Rate Hike Impact Mortgages?

You always have to pay interest when you borrow money and several factors will influence how much interest you pay on your mortgage. Whilst the ECB doesn’t set the interest rates that mortgage lenders charge, it does have a big influence on how much it costs to borrow money to buy a property. Generally, mortgage lenders’ interest rates will move alongside the ECB rates and this ECB rate hike will therefore result in you paying more interest on a mortgage.


Will the New ECB Rates Make it Harder to Get a Mortgage?

The increased ECB rates can sometimes make it more difficult to get approved for a mortgage. All mortgage providers have their own affordability criteria and they take into consideration your income when deciding whether they’re willing to lend to you. Often, mortgage lenders require your prospective mortgage repayments to be below a certain percentage of your income and as interest rates impact how much your monthly mortgage payments would be, you might not meet a mortgage lender’s affordability criteria.

If you have a strict budget, having to pay more interest on your mortgage can make it more difficult for you to find a mortgage product that is within your means too. Being able to make all repayments on your mortgage is crucially important and your property may be repossessed if you fall behind on your payments. So, you should never take out a mortgage that will put you under financial stress every month.

However, there are lots of different mortgage lenders and several mortgage products available to consider, meaning you will likely still be able to find a product that suits you. What’s more, there are some things you can do to increase the likelihood of your mortgage application being accepted and a mortgage adviser can discuss this with you in more detail.


Are there Any Benefits to the ECB Rates Rising?

It’s important to remember that an increase in interest rates can sometimes work in your favour. If you’re currently saving money for a deposit for a new property, you may get more interest on your savings. Depending on the bank you use and the type of account you’re saving in, the new ECB rates might help you save more to put towards your property. This, in turn, can lower the Loan to Value of your mortgage, helping you to get more competitive terms.


Getting Some Tailored Advice from a Mortgage Broker

Whether you’re a first-time buyer or you’re interested in investing in property, our expert team at Mason Wealth Management can assist you. As a very well-respected and truly independent mortgage consultancy, you can rely on us to provide you with the sound mortgage advice you need. Our mortgage brokers know the market inside-out and we can talk you through the different mortgage products available, helping you to make an informed decision.

Over the years, our team at Mason Wealth Management have assisted both residential and commercial property buyers with a vast range of different types of mortgages, and we have the knowledge required to make getting your next mortgage offer as stress-free as possible.

We provide a range of other financial services, including pensions and wealth management. So, in addition to helping you find the best mortgage, we can provide you with comprehensive financial support. To speak to a member of our team about your mortgage needs in more detail, don’t hesitate to get in touch with us today.