Expiring fixed-rate mortgages could mean substantial increases in payments
Is your fixed-rate mortgage set to expire this year? If so, be prepared to see your payments go up, possibly by as much as £2,000 per year. In the past couple of years, with UK interest rates in the 4 percent to 4.5 percent range, two-year fixed rate mortgage lenders were offering deals with interest rates as low as 4.22 percent. With rates up to 5.25 percent now and expected by many to go up further in the short term, however, some lenders’ standard variable rates are currently above seven percent. That means, according to internet site MyFinances, that a borrower transferring from the best two-year fixed-rate deal to the same lender’s current standard variable rate would pay £2,333.76 per year to their payments on a £100,000 mortgage.
Online mortgage lender Mform.co.uk figures that as many as £100 billion in fixed-rate mortgages will expire this year. It suggests that the holders of these mortgages begin now to look into where they want to go for a variable-rate deal. If the borrower waits until time for his or her current deal to end, there are likely to be fewer and poorer deals available. The lender notes that most lenders let a borrower take around three months to accept a deal and that once an offer is made the lender will not likely take the offer back while the borrower makes up his or her mind about whether to accept the deal. Mform warns, however, that there could be a non-refundable fee involved if the borrower does not proceed with an offered deal.