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Borrowers should ‘act now’ if they are on a fixed rate deal that is set to end soon or if you’re on a variable rate, the MoneySavingExpert founder has warned.
In December 2021, the base rate was 0.1 percent however this increased five times in the following months. The rate is now 1.15 percent following the hike last week on 16 June.
Those on a tracker mortgage – a type of variable rate mortgage that ‘tracks’ the Bank of England’s base rate – will see their interest rate hike automatically in line with the increase.
Those on a standard variable rate (SVR) mortgage – in which mortgage payments could change each month – lenders will normally pass the full interest rate increase to you.
Most borrowers will be on an SVR mortgage deal after the initial deal period or tracker rate mortgage comes to an end. Deals will usually be between 4.5 percent and 5.5 percent for most borrowers.
However fixed rate deals are not affected by base rate changes, although lenders have increasingly pulled cheap deals in the expectation of more base rate hikes.
Lewis has now issued a warning in the latest MoneySavingExpert tips update. “Action now to check if you can save is a must.
“Lenders are repricing new deals weekly, meaning today's rates may disappear tomorrow, so delay may be costly.
“The days of sub-1% fixes are gone. Today's cheapest fixes are as low as 2.49% over two years, 2.74% over five, and 2.73% over 10 years.”
Lewis provided tips on how to find the best mortgage for you in four steps. The first is to ask your existing lender for their current deals and to consider a ‘product transfer’ in which you switch to a different deal but remain with your lender.
Using the MoneySuperMarket’s mortgage comparison service could help you get an idea of the best deals on the market.
Borrowers should also consider comparing their current deal to those on the market by using the Ultimate Mortgage Calculator on the MoneySuperMarket’s website.
Finally, using a mortgage broker to aid acceptance could also be an option. When seeking a mortgage, lenders will do both credit and affordability checks which can lead to applications being rejected. A good mortgage broker could help you get an idea of how much you may be able to borrow and which lender may accept your application.
Lewis explained that the lowest cheapest fixed mortgage deals on the market right now are 2.49 percent over two years with Leeds Building Society. Santander offers a 2.74 percent over five years, while Lloyds Bank is offering 2.78 percent over 10 years.