Mortgage warning as millions of fixed deals come to an end – what to ‘keep an eye on’ | Personal Finance | Finance
As the cost of living crisis continues, millions are forced to part with more of their hard-earned cash and feel the squeeze of day-to-day finances.
The Bank of England raised the base rate for the 12th consecutive time to 4.5 percent a few weeks ago. This rise could mean a typical mortgage holder on the standard variable rate could see their bills go up by £35 a month, according to AJ Bell.
Households with a £250,000 mortgage have already been paying £612 more a month compared with November 2021 when rates were 0.1 percent according to TotallyMoney.
Jonathan Merry, CEO of Moneyzine.com has spoken exclusively with Express.co.uk about how homeowners who may see their fixes coming to an end this year can survive the rise in bills, and secure the best deals.
He explained that the first thing people can do is “channel your inner bargain hunter”. He suggested Britons should shop around like their financial future depends on it.
He said: “Don’t settle for the first deal that catches your eye, and never assume that the mortgage lender you’re currently with will provide you with the best deal. Explore the mortgage market, compare rates, and make those lenders work for your attention.
“As with any financial endeavour, watch out for those sneaky fees and charges lurking beneath the surface. They’re like hidden traps waiting to pounce on your unsuspecting budget.
“A good rule of thumb with anything important: break out your thickest reading spectacles and read the fine print. Twice! Keep an eye out for any valuation fees, arrangement fees, or early repayment charges. Know what you’re getting yourself into to avoid any unpleasant surprises.”
He suggested people always speak with an expert and seek advice from a qualified mortgage broker.
A good mortgage broker should help people save money in the long run by offering them the best deal that’s tailored to their financial situation. They’ll also have access to mortgage products not typically available to the general public.
By working with a mortgage broker, people can tap into these hidden gems and secure a mortgage deal that offers better terms, lower rates, or more suitable features than what they could find on their own.
Almost two million households are set to feel the squeeze as their fixed-rate mortgage deals end this year, with most facing the prospect of higher monthly payments.
Those coming off the average 2.58 percent fixed rate available in 2021 will see their mortgage payments rise by £13,000 a year if they’ve taken out a £250,000 loan, according to AJ Bell.
Exactly how much more depends on the size of the mortgage, the rate they fixed at, and their new loan-to-value rate.
Anyone coming off a fixed rate deal who hasn’t got a new mortgage sorted will end up falling on their lender’s standard variable rate (SVR).
MoneyFacts data shows that the average SVR has increased over seven percent and could see an average rate rise from 2.58 percent to 7.3 percent.
Mr Merry continued: “When you look for a mortgage deal, you should always have one eye on the future and stress-test your repayments by hypothetically increasing the interest rates to see how it would affect your budget.
“You might be paying five percent now, and can just about afford that, but what would happen to your repayments if, when you’re due to remortgage, interest rates are now at 10 percent?
“That might seem like an extreme example, but the Bank of England’s average rate of interest in the UK since 1975 is nine percent, and was as high as 17 percent in November 1979. Better to be safe than sorry and never overextend yourself when it comes to your mortgage.”
There are five things that those with deals expiring can do to try and find the best deals:
- Check when the current mortgage deal ends
- Check if a new mortgage rate can be locked in early
- Speak to a mortgage broker and compare the options
- Budget for the upcoming increase in repayments
- Consider overpaying the mortgage if possible