Money Saving Expert Martin Lewis is advising homeowners with mortgages to lock into a fixed-rate deal now. The finance guru offered the advice in his latest Money Saving Expert newsletter, as he predicts continued rises in mortgage rates will add to the cost of living crisis.
Lewis pointed out that the cheapest fixed deals were now double the rates that were available in October, as reported by the Liverpool Echo. Five months ago, more than 50 mortgage providers offered rates of 1% or under, while the current cheapest offer on the market was 1.79% – an £800 a year difference on a £150,000 mortgage. The TV presenter also warned that "things are likely to get worse" after the Bank of England's decision to raise UK interest rates from 0.5% to 0.75%.
Industry analysts Capital Economics forecast that would increase to 1.25% by the end of the year and 2% in 2023. Lewis reasoned that mortgage rates would still compare favourably when looking back at previous decades but, with households feeling the pinch on utility bills and at the petrol pumps, he advised people to act quickly to avoid being drained of more cash to keep a roof over their heads.
He said: "While mortgage rates have increased, in a longer historical context they're still cheap. This is especially true of the cheapest longer fixes which are currently only a touch more expensive than shorter ones, and give certainty for much longer. That means everyone who has a mortgage which isn't already locked in to a decent rate for the foreseeable future should be checking if there's a better deal out there. Even if your deal ends in six months, there are options to lock in a rate.
"Locking in can incur a non-refundable booking fee of £100-£250. Yet with interest rates widely expected to rise even further, you could see locking in as a form of insurance policy by securing a cheaper rate deal now, in case they're much more expensive when you come to remortgage."
The following Money Saving Expert tools are also designed to help you choose the right mortgage for your circumstances:
- Basic mortgage calculator -including what it'll cost
- Compare two mortgages
- Compare fixed-rate mortgages
- Should you ditch your fix?
- How much can I borrow guesstimator
The full edition of the Money Saving Expert newsletter can be read here
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