Homeowners could save more than £5,000 on their mortgage payments by locking into a fixed deal now, according to new analysis.
Research from Experian and L&C Mortgages urges borrowers on a standard variable rate (SVR) to consider switching to a fixed rate two-year offer.
They give the example of someone with a 20-year mortgage loan of £150,000 on an SVR of 4.49%, which has a monthly repayment of just under £950.
But moving to a new two-year fix at 1.11%, and assuming an arrangement fee of £999, saves the borrower over £5,000 across that two-year period.
Experian adds that nearly 6% of all homeowners will be coming to the end of their fixed term within the next three months.
The warning comes after the Bank of England hiked interest rates from 0.1% to 0.25% to help cool surging inflation.
The Monetary Policy Committee this afternoon voted 8-1 in favour of increasing the base rate.
It comes after the level of Consumer Price Index (CPI) inflation yesterday hit 5.1% - its highest level in a decade and above the BoE target of 2%.
The central bank had warned in November that it is likely to hike interest rates in the “coming months”.
But market experts had predicted the surge of the Omicron variant, and fears of an economic slowdown, would delay an immediate rate rise.
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Homeowners with a tracker mortgage - where your rates go up and down - see their mortgage bills rise in line with interest rates.
This means if interest rates increase, the amount you pay each month on your mortgage rises in line with that too.
Those who are on SVRs will have to wait and see if their lender will pass on the rate increase in full or only in part.
But those on a fixed-rate mortgage have a loan with set interest rates that don’t move for a set amount of time.
How to compare mortgage deals
Homeowners will need to act fast to lock into a cheap fixed-rate deal - and banks have been slowly increasing their rates since November in anticipation of a rates hike.
Martijn van der Heijden, CFO at Habito, said: “For homeowners with deals expiring in the next six months, it could make sense to fix their mortgage costs and protect themselves against this further household bills price volatility.
"Anticipating today’s outcome, lenders had started increasing their rates since November. We're seeing a bumping-up of rates for both purchases and remortgages.
"As such, we're seeing customers opting for 5-year fixed-rate deals over 2-year fixes and 10-year plus fixes are also surging in popularity."
Santander was one of the first big-name lenders to confirm it was increasing the rate of its tracker mortgages by 0.15%.
Borrowers should use a mortgage comparison to check whether you are on the cheapest deal - we've got a guide on how to find the best rates here.
When thinking about the switch remember to factor in any other costs and check if there is an early exit fee associated with your current deal.
James Jones, head of consumer affairs at Experian said: “Homeowners may be able to secure substantial savings by switching to a new fixed-rate mortgage deal, so we urge anyone with a fix ending soon to look into their options.
“Taking no action will mean you lapse onto your lender’s standard rate, which will usually lead to a hike in your monthly payments.
“With an interest rate rise looming, it would be worthwhile to explore your options now and get a new rate locked in.”
David Hollingworth, associate director, communications, at L&C Mortgages adds: “As we approach the end of the year, we often see expenses and outgoings increase.
“And with living costs on the rise, it’s more important than ever for consumers to shop around and find a better deal.“
