Spring clean your mortgage

As the daffodils bloom and the green shoots emerge from their winter slumber across the land Britons get their dusters and mops out to clean their houses.

And with longer evenings and a host of bank holidays it is also a great time to spring clean your home loan.

Since last summer the bank of England has raised interest rates three times, and unless you have taken action to secure a cheap mortgage, you might well end up counting the cost of larger mortgage payments as a result of this.

But rather than meekly accept that you are paying more for your mortgage, homeowners are being advised to take action to secure a cheaper deal.

This is especially the case for people paying their lender's standard variable rates - with borrowers typically able to secure deals as much as two percentage points cheaper than this, saving them £2,000 a year in payments (£166 a month) on a £100,000 mortgage debt.

But it is not just people on their lender's standard variable rate - or approaching the end of a fixed-rate deal - who can save money.

Despite Bank of England base rate now being at 5.25 per cent for the last three months, savvy borrowers can still secure a mortgage deal at less than five per cent - either using a discounted variable rate mortgage (which will rise and fall in line with base rate in the months to come) or a fixed-rate mortgage (where the rate will stay at the same price for a set period, regardless of Bank of England changes to base rate).

Currently fixed-rate mortgages are in fashion, with a record 87 per cent of first-time buyers chosing fixed-rate deals according to the latest Council of Mortgage Lenders figures (full story), up from 84 per cent in January, and 82 per cent in the same month last year.

Home movers also favour fixed-rate mortgages, with 70 per cent of Britons moving house choosing fixed-rate mortgages, up from 67 per cent in the previous month.

The average interest rate charged on a fixed-rate mortgage in February was 5.34 per cent, up from 5.27 per cent in January.

However, with experts predicting not more than one or at most two more rate rises before falls begin, fixed-rate mortgage might not be the best plan as they will keep the rate you pay high for the entire period of the fix and might not even protect you from future rises.

"One more Bank rate increase . . . is already priced into most fixed-rate mortgages. However, many borrowers will still prefer a fixed or capped rate for the budgeting certainty and consequent peace of mind they offer," explained Ray Boulger of leading mortgage broker John Charcol.

"As Bank rate is probably close to its peak borrowers who don’t need the security or comfort of a fixed-rate should consider a tracker mortgage, so as to benefit from any Bank rate falls next year."

But Mr Boulger pointed out there are still good-value two-year fixed-rates on offer, for those willing to pay large initial fees.

Arrangement fees have almost doubled in the last three years, research from Find.co.uk reveals, so people looking to switch mortgage are advised to check the overall package - including all fees such as exit and early repayment charges - will save you money not just the headline mortgage rate.

Mortgage holders should also check what you will be charged for redeeming your existing mortgage and factor this in.