Mortgages – Britons urged to act as rate rises could cost thousands
Martin Lewis on mortgage rates rising
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Average two and five-year fixed mortgage rates are at their highest levels since 2008, pushing up costs for borrowers, according to analysis. Across all deposit sizes, the average two-year fixed mortgage on the market on Tuesday had a rate of 6.43 percent, according to Moneyfacts.co.uk.
Amid high inflation, Bank of England base rate rises have also been putting an upwards pressure on borrowing costs.
Nick Chadbourne, CEO at LMS spoke exclusively to Express.co.uk on what people with fixed rate mortgages coming to an end should do.
He said: “The recent announcement of the Stamp Duty cut was well-intentioned, but it will see affordability worsen in the long run because it will increase demand for properties.
“With volatility of the pound and changes to mortgage rates this period of uncertainty will not be going away any time soon, and the scaremongering is doing little to help matters.
“It’s understandable that people are worrying about what this all means for their mortgage payments, especially if their product is set to come to an end in the coming months.
“But there are several things that people can do to help mitigate their worries.
“Firstly, our advice is to be aware of when your early repayment charge expires and act in advance.
“This will give you plenty of time to consult a broker and lock in a rate that suits you rather than sticking with a default product transfer, or worse, dropping onto your lender’s SVR.
“Historically people have shied away from remortgaging because they see it as a painful process, but digitalisation and automation have vastly improved this with it now being possible to complete in just four days. It can give much more certainty over completion dates and more peace of mind.”
Last week, Moneyfacts calculated that based on Thursday’s rates someone with a £200,000 mortgage paying it back over 25 years could end up paying around £5,000 per year more for a two-year fixed-rate deal than they would have last December.
The choice of mortgage products continues to widen, although it remains significantly lower than on the day of the mini-budget, when 3,961 products were available. Some 2,931 mortgage products were available on Tuesday, Moneyfacts said, up from 2,905 on Monday.
As mortgage holders struggle to know what to do given the sudden mortgage market turmoil, Britons can consider making overpayments as a move to fight back against the rising rates if they have the money to do so.
If interest rates continue to climb and reach six percent next year, homeowners may have to pay thousands of pounds more on their mortgage
Making overpayments on one’s mortgage has long been a wise things to do, as it shortens the term of the mortgage, saves people surprisingly huge amounts in interest and delivers the life-changing peace of mind and freedom of being mortgage free faster.
As lenders have radically increased sales of 40 year term mortgages to help improve short term affordability, this trend is hugely increasing the amount people will have to pay in total to buy their home, and leaving thousands still trying to make mortgage repayment into their retirement.
With rising interest rates suddenly back, the argument for making overpayments is stronger than ever.
However it remains a badly overlooked alternative for saving money, not least because lenders have no commercial interest in promoting or facilitating it.
Jinesh Vohra, Founder and CEO of Sprive said, “Mortgage holders face a sudden huge upheaval in their outlook, worrying about where rates are heading and just how high they might be when their current fix ends. In these times of major uncertainty, we want people to know that actually, one of the best things they can do right now, that will make even more sense as rates rise, is make overpayments on their mortgage to save potentially tens of thousands of pounds.
“If mortgage holders can start doing this now, they will not only be saving themselves an increasing amount money, they will be actively fighting back to reduce the future cost of rising mortgage rates. When so many are worrying about what on earth they can do given all the change and market turmoil, making overpayments is a rare universal truth – a great move to make if you can afford it.”
Interest rates are now expected to rise to six percent next year – well above the 1.5 percent rate projected just months ago.
The Bank of England hiked its base rate to 2.25 percent – its highest level in 14 years – as it battles to bring down soaring inflation.
The base rate is important because it is what the central bank charges other banks and lenders.
In turn, this then affects the rates banks charge you, as their customer – so when interest rates are higher, borrowing becomes more expensive.
Source: Read Full Article