Homeowners face ‘biggest impact on finances’ when mortgage deal ends

Martin Lewis gives advice on overpaying on your mortgage

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Currently, 74 percent of homeowner mortgages are on a fixed rate contract, figures from UK Finance show. Brokers have said there is still demand for mortgages but lenders are wary of being swamped with applications while uncertainty in the economy remains.

Katie Brain, consumer banking expert at Defaqto spoke exclusively with Express.co.uk about what steps homeowners can do to prepare for their fixes that may be coming to an end.

She said: “Dig out your paperwork to find out exactly when your fixed rate comes to an end.

“If it is six months or less, try contacting your existing lender, as many of the best buys at the moment are available directly through the lender, and you won’t have to go through any affordability checks as you are only transferring a product with your existing provider.

“Otherwise go to a broker who can search the market for you, but it may be difficult to find one currently who isn’t already swamped with customers.”

If people have more than six months to go before the end of the fixed rate deal, it is very likely that the rate they are paying is lower than what is available now.

Britons should make a note of the date six months before the fixed rate ends so they can start to look around for what is available at that time.

Ms Brain added: “If possible, perhaps try to overpay on your mortgage to reduce the debt but check with your lender how much you can overpay by so that no charges are incurred.

“Typically, lenders allow 10 percent of the loan to be repaid each year without any penalty.”

The reality for most affected could be an increase of around £50 – £100 per month on their existing mortgage payments, but the wider issue is for those people who have fixed mortgages with less than six -12 months remaining on their current term.

Many would have secured these products when the base rate was still around 0.5-1.0 percent so these homeowners are going to see the “biggest impact on their finances” when they apply for a new fixed term with the base rate likely to climb to four percent and by Spring 2023, she explained.

It is estimated that about 300,000 borrowers come off a fixed-rate deal every three months, (average 100,000 mortgage holders per month) and face steep rises in monthly repayments, according to The Guardian.

Bill Blain, from investment firm Shard Capital, said mortgage rates coming down depended on “when we can create stability again”.

He said: “There’s a lot of work to get UK interest rates to come back down especially when we still face an enormous inflation threat.

“The only way you can address inflation is by continuing to raise interest rates, so I think we’re a long way from seeing mortgage rates start to come down.”

He explained that if the Government doesn’t do something to address this, and quickly, Britons could find themselves facing another housing crisis.

When the Bank of England’s Monetary Policy Committee raised its base rate by 0.75 percent to three percent earlier this month there was not much change to rates.

Some expected mortgage rates to rise in the wake of the decision, as they have each of the eight times the central bank has increased the base rate since December 2021.

But while tracker mortgage rates have increased with the rate rise, fixed rates are continuing to fall from the highs they reached following September’s ill-fated mini-Budget.

Lenders including Platform, Yorkshire Building Society, HSBC, Halifax, Lloyds and NatWest have all reduced their fixed rates since the last base rate rise.

The average two-year fix, which peaked at 6.65 percent on October 20, according to Moneyfacts, now sits at 6.28 percent (November 14).

While the five-year fix, which peaked at 6.51 percent, now sits at 6.07 percent.

“It is partly because gilt yields, that dictate the cost of Government borrowing and impact mortgage rates, have fallen back to pre-mini-Budget levels,” Mr Blain added.

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