Almost two million households will see fixed-rate mortgage deals end this year, with most facing the prospect of higher monthly payments.
About 20% of residential mortgage-holders have variable rate or tracker loans, totalling about 1.6 million households in the UK. Their monthly repayment rises whenever the Bank of England increases its benchmark interest rate, which it has done 10 times in a row, and a further rise is anticipated later this year.
A typical homeowner on an average tracker deal now pays almost £400 more a month than in December 2021, when rates started to rise.
Fixed-rate mortgages are different. The monthly payment stays the same for the length of the deal - usually two or five years. About 78% of mortgage holders - some 6.5 million homeowners - have this type of mortgage.
When these deals expire, borrowers automatically move onto their lender's standard variable rate (SVR), which tends to be much more expensive. At the moment SVRs are typically 7% or 8%.
It is thought that 1.8 million fixed deals will end in 2023.
At this point, the vast majority of borrowers take out a new fixed-rate mortgage with the same lender or a rival. About three-quarters use a broker to find a deal.
But the fixed-rate deals available now are much more expensive than they used to be. A couple of years ago, the best deals were at 1% whereas the best rates now are just under 4%.
My deal is expiring, what should I do?
Seek advice from a whole of market broker rather than just your bank. As little as 0.25% less on your rate could save as much as £10,000 over the lifetime of your mortgage*.
Dig out your paperwork to check when your deal ends and your current interest rate.
Get organised. Lenders usually let you secure an offer within six months of the end of your current deal. It generally takes at least four weeks to complete a mortgage offer. Leave it too late and you could end up paying the more expensive SVR for a period between deals.
Look at your budget to decide what you can afford. Your income or circumstances may have changed since your last mortgage. The more complex your situation, the narrower the choice of deals, and the longer it can take to process.
Reades Financial Services are independent whole of market mortgage brokers, we don't charge a fee for advice and its offered with no obligation, so there is nothing to lose and everything to gain from speaking with one of our advisors.
You can request a callback here or get in touch to discuss your requirements - 01244 538 538.
Article posted by Reades Financial Services
*Based on a mortgage of £240,000 repaid over 25 years at a rate of 4.25%, the amount repayable over the lifetime of the loan will be £389,906. At a rate of 4%, the amount repayable will be £379,883 saving £10,023.
Your home may be repossessed if you do not keep up with your mortgage repayments. Charges may apply.
Rates often fluctuate and therefore are subject to change at any time. Nothing in this article is to be interpreted as advice.
Source - BBC News