Martin Lewis warns cheap mortgages disappearing as homeowners end fixed rate deals early | Personal Finance | Finance
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Furthermore, the financial expert is sounding the alarm regarding the dangers of mortgage holders leaving their fixed rate deals early as they could face expensive exit fees. Fixed rate mortgages have a set interest rate for the entire term of the loan and are chosen by homeowners who want to know how much they will be paying each month. The interest on the mortgage does not change during this period of time. However, fixed rate mortgages have risen eight months in a row, Overall, the average outstanding fixed-rate mortgage in the country is £161,774.
In light of the recent interest rate hikes by the Bank of England, many homeowners are desperately looking for better deals to help with their payments. However, Martin Lewis is warning that these are “disappearing”.
While on BBC Radio 5 Live earlier today, the financial journalist discussed how favourable mortgage deals for potential homeowners are far and few in between. He also compared today’s rates with past ones in October.
Mr Lewis explained: “The important thing to understand is that the cheapest mortgage deals are disappearing. If you’re on the variable rate or you’ve got a fix that is due to end soon, action now to check if you can save is a must.
“Lenders are repricing new deals weekly so today’s cheapest rates may be gone tomorrow. Delay could be costly.
READ MORE: Nationwide increases interest rate to 5% on key account
“Back in October, we had sub-one percent fixes and we had hundreds of deals between one and two percent. Today’s cheapest fix over two years is 2.49 percent.”
However, the mortgage expert noted that over a five year period the cheapest fix sits at 2.74 percent, while over 10 years it’s 2.73 percent.
He added: “If you can visualise it, what we’re seeing is normally you pay a decent premium for fixing longer. But there really isn’t much of a premium for fixing longer right now.
“You can lock in for a deal for five or even 10 years at not much more than the cost of a two year fix. With further base rate rises predicted, today’s longer term fixes may look incredible deals in hindsight.
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“Certainly if what you want is peace of mind that things aren’t going to be disastrous in the future, then locking in and locking in longer could help.”
However, Mr Lewis warned the British public of the dangers posed by early exit charges could prove costly to some.
“Though I would be mindful of early exit charges on those deals so you must be confident either you won’t move or you ensure the deal is portable which means it could move with you,” the financial journalist said.
“Ask your existing lender what its current deals will be.
“That’s if your fix is nearly ending or you’re on a variable rate. That’s called a product transfer.
“These days as your existing lender can forgo affordability checks, if you’re not borrowing more it can work out well and there might be less paperwork and lower fees.”
Mr Lewis encouraged those concerned about potential hikes to their mortgage repayments to get themselves onto comparison sites.
The financial journalist said: “Get yourself onto a mortgage comparison site to see roughly what there is on the wider market that you can get.
:After that, compare it to your current deal.
“To put this in perspective, for extra one percent interest on a mortgage that will cost you £600 a year more on a £100,000 mortgage, £1,500 more on a £250,000 mortgage and £3,000 more on a £500,000 mortgage.
“Making sure you keep that rate low is important. Acceptance is really tough. Lenders do both credit and affordability checks.”
Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip.
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