Martin Lewis has urged homeowners to review their mortgage after the Bank of England hiked interest rates for a fourth straight week last week.
The consumer expert said those on variable plans have about 30 days to look around before their bills increase, while others with fixed plans due to expire soon might want to consider switching to a new plan now.
“The cheapest fares are gone – if your fix is ending soon or you’re on the standard fare, see if you can save NOW,” explained Mr. Lewis in Wednesday’s MSE newsletter.
“The 0.25% increase in the base rate will likely take a month to impact most standard floating rates (SVRs), although some tracker rates have already risen. It will add around £12/month per £100,000 mortgage,” Mr Lewis added.
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Fixed rate offers are slowly creeping in. Last fall there were over 50 fixed rate mortgage deals below 1%. Now the lowest fix is at 2.1%.
That means for someone with a £200,000 30-year mortgage, the cheapest interest rate today would cost £120 a month more than the cheapest in October.
“With more rate hikes forecast and many lenders’ standard variable rates rising to 5%, it’s a must to see if you can save by changing the deal,” Lewis added.
“You may not be saving as much as you were a few months ago, but compared to now, switching could still save you £1,000.”
We have a guide to debt restructuring here.
Further hikes in the policy rate are expected, and analysts at Capital Economics expect it to reach 1.25% by the end of 2022 and 2% in 2023.
You don’t even have to be at the end of your mortgage term to get involved in a new business.
Many banks allow you to take out a new mortgage up to six months before your current one expires.
Lewis said tracker mortgages are often cheaper than fixed-rate loans, but these move in line with the base rate whenever there is a change.
Mortgage repayments have risen by a total of £100m a month since the autumn, according to further research from L&C Mortgages, as interest rates on new fixed income deals rose steadily.
It found that the average of the top 10 lenders’ lowest two- and five-year mortgage rates now stood at 2.36% and 2.46%, respectively, after falling from historic lows of 0.89% and 1.05, respectively % were up last October.
David Hollingworth, Associate Director at L&C Mortgages, said: “The market is moving at breakneck speed as lenders try to manage their product range and loan volumes, often resulting in products lasting days instead of weeks.
“This presents a real challenge for borrowers trying to keep up with market movements, but with mortgage rates continuing to rise, it’s even more important for borrowers to stay on top of their mortgage.”
Debt restructuring tips from Martin Lewis
1. Find out the details of your current mortgage
This includes the interest rate, monthly repayments, and outstanding debt.
Homeowners should also find out what type of mortgage they have and the term – how long you have to pay everything back.
Most importantly, also check to see if you have a prepayment penalty — a fee that’s due if you switch too soon.
2. Look at the cheapest offer from your current lender
Taking out a new mortgage with your existing lender is called a “product transfer.”
The main benefit is that your lender can avoid the usual affordability checks they perform on new customers.
It can also mean paying lower fees and it’s less of a hassle in terms of paperwork.
3. Compare what offers are available
Once you know what your lender’s best offer is, go and check out their competitors. A mortgage broker can help, although many charge a fee.
4. Use online calculators to find the best deals
MoneySavingExpert has tools to help you find the best mortgage for you:
– Basic mortgage calculator – including costs
– Compare two mortgages
– Compare fixed-rate mortgages
– Should you drop your solution?
– How much can I borrow ratetimator?
5. Work out the best offer for you – and do your best to be accepted
When you refinance, a lender performs financial checks on you.
Lewis said making sure you have good credit can help improve your prospects.
He advised Brits to check their credit file (free) to make sure there were no errors.
Reduce loan applications and pay off debt when you can.
It can also help to spend as little as possible in the months before applying for a mortgage.
They want to see that you can afford to pay back, so spending less before applying shows them you can be frugal.
6. Consider using a good broker
Not only do brokers compare the entire market for you, they can also get access to exclusive offers that you as a member of the public might not get.
A good broker can also argue your case with a lender if they initially say no to giving you a mortgage.
This is especially important if you have something unusual about your case, such as: B. bad credit, or if you are trying to buy a non-standard home.