Money Saving Expert Martin Lewis has warned that UK homeowners are 'at risk from a ticking mortgage time bomb', adding that a 'triple threat' could be soon inbound if the Bank of England rises its base rate of inflation to five of six per cent.
The current rate set is now at 2.25 per cent - but it was a mere 0.1 per cent a year ago. This rise is factored into the price of hopeful homeowners looking to land a new mortgage.
The Mirror reports that while variable-rate mortgages go up in price almost instantly, lenders often put up prices if they suspect a new base rate rise is approaching.
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Fixed-rate home loans also rise in price when they come up for renewal. The warning comes as the Bank of England are predicted to increase their base rate to help tackle rising current inflation - which sits at 10.1 per cent at the time of writing.
In a letter to the Telegraph, Lewis said: "If Britain's base rates continue to rise towards 5 or 6%, as the markets predict for next spring, we risk a triple threat. The impact on mortgage rates themselves; the fact that fewer people will pass affordability checks to get the cheapest deals; and that there could be a house price correction - with mortgage holders' loan-to-values dropping - hurting people's ability to secure the cheapest rates."
Lewis said he wanted to see 'regulatory preparation and intervention to help protect people'. This could include changing re-mortgage rules so people find it easier to get cheap deals, he added.
Lewis's other ideas are to allow payment holidays and requiring mortgage lenders to make it easier for people to change their home loan length. He concluded: "This needs investigating now, rather than waiting to see what happens, because, as recent evidence shows, prevention is better than cure."
However, mortgage experts say that mortgage rates may be about to fall, after new Chancellor Jeremy Hunt took action to undo a lot of former Chancellor Kwasi Kwarteng's economic ideas. Nick Mendes, mortgage technical manager at broker John Charcol said Mr Hunt's announcements 'should signal a peak for the cost of fixed rate mortgages' but that 'it makes it is less clear when they will start to fall'.
Mendes said mortgage rates could also drop because lenders expect something called swap rates to fall. The important point here is that the price of swap rates has been rising, and that means fixed rate mortgage costs are too.
When mortgage lenders give out home loans, they need to get that cash from somewhere, where as in the old days, mortgages were mostly just the cash building societies raised in interest from customers' current account cash.
Now mortgage lenders get the cash they lend homeowners from several sources. One of those is borrowing money from other financial firms, then paying it back with interest.
Swap rates are what mortgage lenders pay to financial firms to get the cash they then lend consumers to buy houses. That affects fixed-term mortgages because lenders buy 'chunks' of money over two, three, five or ten years.
Anyone with a fixed rate mortgage will recognise those numbers straight away as the length of time a mortgage normally lasts. Mendes said: "The fall in gilt yields, assuming it is maintained, will feed through to lower swap rates and hence reduces the cost of funds to lenders."
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