Martin Lewis talks about rising interest rates on mortgages
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Mortgage payments are some of the biggest financial commitments a person will ever take on in their lifetime. As a result, keeping these low and paying off the debt will be two of the main priorities for homeowners. To achieve this goal, Britons have been issued a stark warning on the action they need to take sooner rather than later.
According to new analysis, borrowers could save over £5,000 on mortgage payments by switching to a new fixed rate two-year offer.
This is particularly important as it has been predicted interest rates could rise, with the Bank of England scheduled to meet later next week to discuss the matter.
It therefore could be the ideal time for homeowners to remortgage and lock in a potentially lower fixed rate to avoid higher payments in the future.
For example a homeowner with a £150,000 20 year mortgage loan on a lender’s Standard Variable Rate (SVR) of 4.49 percent will have monthly repayments of £948.16.
The same mortgage on a two-year rate remortgage deal of 0.99 percent will have a monthly repayment of £689.17 – representing a saving of £6,215.76.
Indeed, even if the arrangement fee of £999 is taken into account, this will still leave the homeowner better off by £5,216 over the two year period.
James Jones, Head of Consumer Affairs at Experian, said: “There can be substantial savings to be had by switching to a new fixed-rate mortgage deal, so we urge anyone with a fix ending soon to check out their options.
“Taking no action will mean you lapse onto your lender’s standard rate, which will usually lead to a hike in your monthly payments.
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“You can get help exploring your options by seeking advice from a free, independent mortgage broker.
“It’s also worth taking a moment to review your credit score, giving you the opportunity to make improvements where appropriate.”
Data from Experian has suggested that almost six percent of homeowners could be coming to the end of a fixed term deal in or over the next three months.
These individuals will need to remortgage onto a new fixed rate deal if they want to avoid lapsing onto their lender’s SVR which could cost them more.
If a person wishes to remortgage they are generally advised to speak to a mortgage broker.
These experts can generally provide tailored assistance and guidance to suit a person’s circumstances.
David Hollingworth, Associate Director, Communications at L&C Mortgages added: “With living costs on the rise it’s important consumers are aware they can shop around and find a better deal.
“They could be saving hundreds of pounds a month by switching to a fixed rate mortgage.
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“There remain competitive deals on the market, but if expectation of an interest rate rise persists then the deals currently available might not be around for too much longer.
“Use a mortgage comparison to check whether you are on the cheapest deal, or if money can be saved by using another company’s offer.
“When thinking about the switch remember to factor in any other costs and check if there is an early exit fee associated with your current deal.
“However, shopping around could help to save thousands of pounds over a short period of time.”
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