Martin Lewis has warned people who have a fixed-rate mortgage about what he feels is a 'ticking timebomb' for them if their deal ends soon. Predicting a hike in interest rates, the financial guru fears this could have a lasting impact on homeowners.
The Money Saving Expert founder explained that many families could have issues when they try to negotiate a better deal after their current mortgage expires, with some facing the prospect of not passing affordability checks. These are designed to determine whether a customer wanting to get a mortgage can pay for it.
Homeowners on fixed-rate deals which follow the Bank of England's interest rates could face having to make bigger payments. And if they fail to get a better deal because they can't pass the affordability checks, they could be stuck paying high and fluctuating interest rates as well as battling the cost of living crisis in every area of their finances, WalesOnline reports.
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Speaking on his Martin Lewis Money Saving Show, the financial expert said: "We are clearly in the midst of a cost of living crisis so everybody has less room than they did before because other costs have gone up. My great fear is we're seeing interest rates going up and fewer people are going to be accepted when they apply for a cheap mortgage because many are going to fail the affordability checks.
"That leaves us with a ticking timebomb because most people are going to be on cheap fixes. And they're going to expect when they end, they are going to be able to fix again at the same rate.
"But the rate is likely to be a lot higher. And they may not be able to get them and that is a real problem coming forward."
While Martin usually avoids making predictions, he told viewers of the show that he believes interest rates will raise further in the future. The Bank of England raised rates to 1% last month in a move it said was to help lower inflation, which is set to reach 10% later this year.
The Bank of England said: "If you have a loan or mortgage that charges you a variable interest rate, you might find that the cost of your repayments go up. Say you have a £130,000 mortgage that you want to pay off over 25 years. If the interest rate on the mortgage is 2.5%, the monthly repayment will be £583.
"But if the interest rate is 0.25% higher – the amount we raised Bank Rate in May 2022 – the monthly repayment rises by £17 to £600. If you’re on a fixed rate you won’t see any change until the end of your fixed period."
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