Are Mortgage Rates About to Rocket?

by Mark Johnston

It is now generally accepted by many that the Bank of England will be forced to increase interest rates sooner than expected to try and drive down inflation. Most experts are signaling that it’s time for borrowers to start to look for a better deal.

Those borrowers who have not looked to secure a new deal may well be paying out thousands of pounds more than they need to. It’s always best to shop around and look at both direct deals with lenders as well as taking advantage of professional advice from a mortgage advisor. It is also worth remembering that the lowest rate doesn’t always equal the cheapest mortgage. Borrowers looking for a good deal should take into account fees and other costs.

Most lenders charge borrowers an early repayment charge if they want to leave their current deal before the end of the term but it’s worth checking with individual banks and building societies as there are some exceptions. It would also be worth calculating how much this would be and offset it against any potential savings of moving onto another product. Borrowers may well find that paying the charge works out better in the long run.

Ray Boulger, of John Charcol, pointed out that he believed that fixed rate mortgages are now at their lowest and will start to increase, he said: “If you have been waiting for the bottom of the pricing market, we are probably here. If you are paying a lender’s SVR of 3.5 per cent or over, and have 15 per cent or more equity in your home, then you are very likely to get better value by switching to a new product.”

As previously outlined, it’s important not to just look at the lowest rate of interest and instead to take all the other factors and fees into account before coming to a decision. The internet provides a fantastic resource for borrowers searching for a competitive deal. Many websites and price comparison sites offer best buy tables that show the top deals based on the rate of interest but these can often be misleading. The lowest rate of interest often appears to be very attractive but these aren’t always the best deals when other factors such as arrangement fees, booking fees, completion fess, early redemption and overpayment charges are taken into account. One thing to look out for are mortgage lenders who charge non refundable arrangement fees so borrowers are still liable for the charge even if they do not go ahead with the mortgage.

Since the financial crisis made it more difficult to secure a mortgage, lenders have been cashing in on desperate borrowers by charging inflated fees. Average fees are around £2,000 and in many cases these need to be paid upfront and are not allowed to be added to the balance of the loan. A recent report by a leading consumer group highlighted that the level of fees have increases dramatically over the last few years with some lenders charging almost £1000 more than three years ago.



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