The Bank of England has warned a million people will see £500 a month added to their mortgages over the next three years as fixed-term deals come to an end. That is on top of the 4.5million people who have already seen their mortgage bills rocket in recent months as they switched from old fixed-rate deals.
Ben Thompson, Deputy CEO at Mortgage Advice Bureau has shared his top tips to help anyone coming off a mortgage deal in today’s volatile economic climate.
Ben said: “Homeowners across the UK will be feeling concerned about where interest rates are now, and where they might be heading in the next six months. While the size of interest rate hikes seems to be smaller than they were at the start of the increase cycle, further increases in rates are likely as policymakers try and take back the reins on inflation.
“Those looking to remortgage are faced with a challenging and volatile arket. Nevertheless, there are some actionable steps that homeowners coming towards the end of their current fixed-rate deals can, and almost certainly should take.
Get into the details
“Finding out exactly when your current mortgage rate is set to end, your outstanding balance, and how much you currently pay each month is key. From here, you can research what rates are currently available, and what your options might be. Some homeowners on fixed deals will have read about the previous 12 rate rises but, until now seen no change to their mortgage repayments. Therefore, for anyone whose mortgage deal is soon coming to an end it’s crucial to know and come to terms with how much repayments are likely to go up by.
Make savings where you can
“It may feel tough right now, but if you can, review your finances and see if you can make any additional savings in anticipation that your repayments will go up.
Get in early
“With interest rates likely to go up before they come down, consider locking in a new rate with your lender early. Many lenders will allow you to move onto a new rate three or six months before the official end of your current rate.
“However, be aware that if mortgage rates do come down, you might find yourself on a higher rate than that available on the market. The important thing here is to get the facts from your lender, so you know what options are available to you.
Know your credit score
“If you move your mortgage to a new lender, you’ll need to undergo affordability checks and lenders will look at your credit score. This can impact how much they will lend you, and even the interest rate they offer you. It’s important you know what your score is and, if required, do as much as you can to improve it. This might involve closing old bank accounts, making sure you are on the voters/electoral roll, declaring your address, or looking at your credit limits.
Exclusive rates and deals
“Speak to your current lender and see what rates or deals they have available. Whilst your lender will most likely offer you a deal to keep you, in many instances a Mortgage Adviser will be able to beat it, quite simply because they will be able to access deals from circa 100 lenders, not just one.
Speak to a mortgage adviser
“When searching for a mortgage deal that suits your needs, for the above reason, it's crucial to shop around and speak to an adviser who has access to a variety of mortgage products. The best time to do this is a few months in advance, most typically at least 6 - in fact, the sooner, the better.
“Starting the process early will make it easier to anticipate what's coming, and gives your adviser time to find a solution that works for you and your unique circumstances. Remember that you aren’t alone in this, and there are people to help you.”
