Martin Lewis says anyone buying a home should 'act now' as mortgage rates rise.
The MoneySavingExpert founder says cheap mortgage deals may soon 'disappear'. The UK base rate is the highest it’s been since 2009 after the Bank of England hiked interest to 1.25%.
And according to Martin, there’s a strong signal, unless there’s radical change, more hikes are coming. Those on a variable or tracker mortgage will soon see costs increase, while those on a fixed rate won't see any change until their current fix ends.
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Three-quarters (75%) of the just under nine million residential mortgages outstanding are fixed rates, according to trade association UK Finance. But homeowners on variable deals tracking the base rate will see an impact, reports LancsLive.
Some lenders may also decide to put up their SVRs (standard variable rates), which they set themselves and those on tracker rate mortgage see their interest rates go up automatically in line with the BoE rate hike.
The average SVR has already increased from 4.40% in December 2021 to 4.91% in June 2022, according to Moneyfacts.co.uk. According to UK Finance, 1.3 million fixed mortgages are ending at some point this year – meaning many homeowners will be looking for a new deal.
You'll usually be on an SVR type mortgage deal after your fix or tracker rate ends - with deals likely to be between 4.5% and 5.5% for most. Fixed rate deals aren’t affected by base rate changes - but lenders have slowly been pulling cheap deals in recent months in anticipation of more rate hikes.
In the latest MoneySavingExpert alert, Martin said: "Action now to check if you can save is a must. Lenders are repricing new deals weekly, meaning today's rates may disappear tomorrow, so delay may be costly."
Martin’s pulled together key need-to-knows to review your rates, including how to find the best mortgage deal as well as boost savings by possibly 50%.
David Hollingworth, associate director at mortgage adviser L&C Mortgages said: “We’ve seen more borrowers looking to secure a rate further ahead of the end of their current deal, in an effort to get ahead of the increases.”
Homeowners looking to fix into a new mortgage deal may find that their choice has shrunk. According to financial information business Defaqto, the number of fixed-rate mortgages on the market has decreased recently after it counted 1,953 fixed-rate mortgage deals available, down from 2,086 deals two months ago.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: "Borrowers who lock into a fixed deal can protect themselves from future rate rises, but those building a deposit may not be able to afford a mortgage as interest rates and living costs continue to climb. Fixed rates are on the rise, with the average two-year fixed-rate rising by almost one percentage point since December 2021.
"As the rate gap between the average two-year and five-year fixed-rate has narrowed, fixing for longer may be a sensible choice. Borrowers could even lock into a fixed mortgage for a decade if they are prepared to commit to such a lengthy fixed term.
"Seeking advice is sensible to assess the abundance of deals out there to ensure borrowers find the most appropriate choice based on the overall true cost." Ms Springall said switching from an SVR, which borrowers often end up on when their initial deal comes to an end, to a fixed rate could significantly reduce someone’s mortgage repayments.
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