Martin Lewis has issued a mortgage alert as he urged homeowners to consider locking into a fixed rate.
The finance guru shared the advice in the latest edition of the Money Saving Expert newsletter. The UK is currently facing a cost-of-living crisis due to rising energy bills, fuel prices and the rate of inflation. Martin also warned mortgage rates look set to surge as the cheapest fixed deals are now double October's rates. The Money Saving Expert said there were over 50 mortgage deals below 1% in October 2021 - whereas the cheapest rate today has soared to 1.79%.
This is the equivalent to an extra £800 a year on a £150,000 mortgage. Martin warned "things are likely to get worse" after the Bank of England increased UK interest rates from 0.5% to 0.75%. The finance guru said further hikes are expected as analysts Capital Economics expect it to hit 1.25% by the end of 2022 and 2% in 2023. However, he said the rates are still "cheap" and advised homeowners to consider locking into a fixed deal now.
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He said: "While mortgage rates have increased, in a longer historical context, they're still cheap. This is especially true of the cheapest longer fixes which are currently only a touch more expensive than shorter ones, and give certainty for much longer. That means everyone who has a mortgage which isn't already locked in to a decent rate for the foreseeable future should be checking if there's a better deal out there. Even if your deal ends in six months, there are options to lock in a rate."
Martin said some lenders will allow homeowners to lock into a new fixed rate deal up to six months before their current one ends. He added: "So it's worth checking deals now if your fix or tracker ends before September.
"Locking in can incur a non-refundable booking fee of £100-£250. Yet with interest rates widely expected to rise even further, you could see locking in as a form of insurance policy by securing a cheaper rate deal now, in case they're much more expensive when you come to remortgage."
The Money Saving Experts offers a variety of tools to help work out the best mortgage deal for you:
- Basic mortgage calculator -including what it'll cost
- Compare two mortgages
- Compare fixed-rate mortgages
- Should you ditch your fix?
- How much can I borrow guesstimator
You can read the full edition of the Money Saving Expert newsletter here
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