i7 CUNNING TRICKS to beat mortgage rate hikes

ON SATurdAY, we explained how switching all your household utilities away from firms that penalise loyal customers could slash up to £3,000 off your bills.

Clean interest you Today, tackle Your rates. Money the Finances biggest Mail’s series threat Spring helps to your wallet this year: rising

The clock is ticking for homeowners. The Bank of England expected to hike base rate from 0.5 pc to 1 pc by december.

You can be sure that banks will do everything in their power to pass on these increases to customers who have a mortgage.

The hikes could add an extra £38 a month to the typical repayment, undoing all the hard work you put in in sparkling to get the order. rest of your finances

To soften the blow, here we reveal seven expert tricks to beat the hikes . . .

1. FIX FOR LONGER

IF YOu still haven’t fixed your mortgage rate, get your skates on. Banks already and started building pulling societies their have best deals Some as three rate hikes million loom. people are paying variable their rate (SVr) lender’s — the standard rate to which a mortgage reverts at the end of a fixed deal — which currently averages 4.76 pc. Some are data as firm high Moneyfacts. as 5.99 pc, according to

By comparison, you can get a cheap fixed deal for as little as 1.24pc. That’s the best two-year rate, from Yorkshire Building Society.

Fixing your loan gives you the peace of mind that for two, five or even ten years, your repayments won’t change.

For most people, five-year fixed rates are the way to go. That saves you having to find yet another new deal in a couple of years, when interest rates could still be climbing.

For example, on a £150,000 mortgage taken out over 25 years, monthly repayments at 4.8 pc would be £859.50. By switching to the lowest five-year fixed rate from HSBC, at 1.71 pc, repayments would be slashed to £614.82 — a saving of £244.68 a month or £2,936.16 a year.

2. RESERVE A RATE

IT MAY be that you’re nervously waiting to lock in to a fixed rate because your current deal hasn’t expired. Most fixed mortgages have early repayment charges that are triggered if you remortgage before the end of the term. These can be as high as 7 pc of the loan value, or £10,500 on a £150,000 mortgage.

But few people realise that you can lock in to a top rate months in advance. Mortgage offers are typically valid for three to six months — so bag a rate now before deals get more expensive.

Offers from NatWest, Yorkshire Building Society and Bank of Ireland are valid for six months. At Nationwide, purchase offers are valid for 180 days, but those on remortgages stand for 90 days.

3. PAY TO EXIT DEAL

EVEN if your deal has longer to run, it could still work out costeffective to swallow the early repayment charge and switch to a low rate.

Early repayment charges vary according to lender and mortgage size. Check your paperwork for how much you’ll have to pay, then see whether the savings from your new deal can beat that figure.

4. REDUCE LOAN

WHEN interest rates and returns on savings are low, it makes sense to plough money into paying your biggest debt — your mortgage. Say you have a £150,000 25-year mortgage at 3pc. Overpaying by £50 a month would mean your loan is paid off two years and three months early, saving you £6,548 in interest, according to broker London & Country.

Most mortgages typically allow you to overpay 10 pc of the balance each year without penalty.

5. OFFSET THE DEBT

SOME lenders allow you to merge your savings with your mortgage account via a so-called offset mortgage. You only pay interest on the sum of your loan minus your savings balance.

So, if you had £10,000 in savings and offset it against a £150,000 loan, you’d pay interest on £140.000. On a 25-year mortgage at 3pc, this would save £10,426 in interest and pay off the mortgage 13 months early, according to L&C.

The bigger your savings pot, the more money you save — and the quicker you pay off the loan.

Offsetting £20,000 would save £19,486 and shave two years and two months off the term.

And with most deals, you retain instant access to your savings.

6. BOOST DEPOSIT

THE cheapest mortgages are reserved for those with the largest amount of equity in their homes. This is because the bank sees you as a lower risk.

For example, if you can stump up a 20 pc deposit, you’ll get a better rate than with only 10 pc.

7. FACTOR IN FEES

dON’T just go for the cheapest headline interest rate. You need to factor in all the charges. Some low rates come with eye-watering arrangement fees.

If you have a smaller mortgage, then it can actually work out cheaper to plump for a deal with a higher rate and a low fee.

Mark Harris, of mortgage broker SPF Private Clients, says the tipping point in the following example is £125,000.

For instance, if you took a twoyear fix from HSBC at 1.89pc with no fee, you would pay £4,725 in interest over the two years.

If instead you took HSBC’s 1.49 pc two-year fix, which has a £999 fee, you would pay £3,725 interest over the same period. When you add the £999 fee, that takes you to £4,724, making it a better deal.

The numbers will be different depending on the deal you select.