Did you fix your mortgage two years ago? Act now or pay DOUBLE when rates end
Borrowers with a £200,000 25-year mortgage could see their repayments hiked by £3,352 a year this month
TENS of thousands of homeowners who took out a fixed-rate mortgage two years ago are being warned to remortgage now or face paying DOUBLE.
Borrowers who took out a two-year fixed rate mortgage in January 2017 have enjoyed paying average interest rates of 2.31 per cent over the past two years.
But when their deals end this month, they'll be moved onto their lender's standard variable rate (SVR) which is a pricey 4.9 per cent on average.
This means a borrower with a £200,000 25-year repayment mortgage would see their repayments hiked by £279 a month - or £3,352 a year on average.
Darren Cook, finance expert at Moneyfacts, said: “Two years ago, the mortgage market was experiencing an aggressive drop in rates, which saw the average two-year fixed mortgage rate fall from 2.56 per cent in January 2016 to 2.31 per cent in January 2017.
"Borrowers who took advantage of this increased competition between lenders at the time could now see a difference of 2.59 per cent between their previous fixed rate and the current average SVR (4.9 per cent)."
How do you find the best mortgage deals?
HERE'S how to ensure you get the best deal on your mortgage or remortgage:
Websites such as MoneySuperMarket and Moneyfacts have mortgage sections so you can compare costs. All the banks and building societies will have their offers available on their sites too.
If you're getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, which will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide if you want a fixed-deal where the interest you're charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
And while you might be tempted to get a mortgage without a deposit, they tend to be more expensive than other deals, so you could be better off saving up instead.
You can check out our guide to the best first-time buyer mortgage deals here.
To beat the SVR hike, borrowers need to remortgage. The current average two-year fixed rate is 2.53 per cent.
Despite this being higher than two years ago, it could still cut monthly repayments by £257 or £3,088 compared to sitting on the SVR.
Mr Cook added: “Faced with such a big jump in monthly repayments, it clearly pays for borrowers to shop around and remortgage once their initial rate has come to an end.
"However, remortgage customers must consider all aspects of the mortgage to ensure they are getting the best deal for them.”
More on mortgages
It comes as worrying research published today found that four in 10 homeowners will be saddled with mortgage debt in retirement.
But earlier this week the financial regulator did pledge to help up to 140,000 mortgage prisoners get better home loan deals.
Plus, here are the 10 reasons why you might be rejected for a mortgage – and how to increase your chances of getting accepted.
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