Is this your last chance to grab a cheap mortgage?
HOMEOWNERS face a race to lock in to a cheap mortgage after the Bank of England warned the era of low rates is ending.
Mortgage rates have been at a r ecord low since official in terest r ates w ere slashed to 0.25 pc last summer.
But last week Mark Carney, Governor of the Bank, signalled tha t the base r ate could rise to 0.5 pc by next summer before reaching 1 pc or higher by mid-2020.
A hike could mean a sudden increase in monthly repayments for millions of homeowners on variable rate mortgages.
In September and October, more than £35 billion of fix ed home loan deals will move on to v ariable deals — the lar gest amount since 2012, according to the CACI Mortgage Market Database. Now experts warn that super-cheap mortgages could disappear, so you’ll need to act fast.
David Hollingworth, of broker L&C Mortgages, says: ‘Borrowers should be aware mortgage rates will begin to climb before the Bank of England moves rates, so they need to lock in before that happens.’
If y ou’re one of the thr ee million homeowners si tting on a standar d variable rate (SVR) — the default rate you are moved to w hen your fixed rate ends — you could sa ve hundreds of pounds a month by fixing.
The average SVR is 4. 6 pc, which costs £842 a month on a £150,000 mortgage. By comparison, Yorkshire Building S ociety currently has a tw o-year fix a t 0.99 pc, costing £565 a month — a £277 saving.
Two-year deals typicall y off er the cheapest rates on the mar ket an d are good f or those w ho know the y might have to move in the near future. However, by taking ou t a tw o-year deal y ou run the risk of ha ving to r emortgage at the same time Bri tain officially leaves the European Union. Experts say the uncertain ty surrounding Brexit may cause mortgage rates to rise, which is why an increasing number of people are opting for a five-year deal.
While they are a li ttle more expensive than two-year deals, five-year fixes are still competitive.
The cheapest fi ve-year deal curr ently on off er is HSBC’ s 1.5 9 pc deal f or borrowers wi th a 4 0 pc deposi t. On a typical£150,000 mortgage your monthly repayments work out at £606 — £41 more than Yorkshire BS’s top 0.99 pc two-year fixed r ate. The total fi ve-year cost including a £999 fee is £37,375.
If y ou know y ou will not be mo ving house within the next decade i t may be well worth considering a ten-year fix.
First Direct has a 2. 49 pc deal wi th no fee. This is £672 a month — just £66 more a month than the cheapest five-year deal. However, these deals can be inf lexible and have hefty early repayment charges.
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