People with fixed-rate mortgages could be facing a £2,400 hike in the cost of payments
Fixed-rate mortgage costs to soar
Wednesday, 06 Apr 2005 12:49
As many as 450,000 people with a fixed-rate mortgage could see the cost of their payments rocket £200 a month, or £2,400 a year, MoneyExpert has warned.
This is the number of people who took out fixed deals in 2003, when the average interest rate charged on such loans was 4.23 per cent, the financial product comparison service points out.
Since then the average cost of a fixed deal has risen to 5.5 per cent, but for people whose mortgage fix is due to end will normally see their rate move up to their lender's standard variable rate. The average for these now stands at 6.64 per cent,
For someone with a £100,000 interest-only mortgage, this will see repayments rise from £352.50 a month to £553.33 - an increase of £2,409.96 a year.
For people with a similar repayment mortgage, costs will rise £145.58 a month, or £1,746.96 a year.
"Homeowners who took out fixed-rates two years ago received fabulous deals and have done very well, However the interest rate climate has changed decisively since then and they have to take action or risk a massive rise in their monthly mortgage payments. Doing nothing is not an option," said MoneyExpert chief executive Sean Gardner.
MoneyExpert advises consumers facing this payment hike to: Check if your current mortgage provider offers any special deals before shopping around as they may be keen to keep your business.
Check if your current deal locks you in for a period after the end of the special offer. Redemption penalties can run into thousands and will wipe out any potential saving for moving to a new deal.
Look out for arrangement/application fees for your next mortgage. They can be worth paying if you will save money in the long-term but need to be budgeted for.
Decide whether you want to move to another fixed-rate or whether you would prefer a discounted rate. Discounts can be cheaper but do not offer the certainty of a fixed-rate in the long term.
Look out for special deals on remortgaging such as free valuations or legal fees. They can make a substantial difference when comparing deals.
Check the deposit needed as some of the best deals are not available on high loan-to-value percentages
Check if a higher lending charge is applied, particularly if you are borrowing above 90 per cent of the value of the property.