Martin Lewis has explained three things homeowners must do now over fears mortgage rates could be about to soar.
Personal finance and market experts are currently forecasting that the Bank of England will hike the so-called base rate from 0.1% to 0.25%.
This is bad news for homeowners with a tracker and variable rate mortgage – where your rates go up and down – as they’d see their mortgage bills rise in line with interest rates.
But speaking during his show, Martin pointed out how mortgage rates are at an all-time low right now, with the cheapest fixed deal being 0.84%.
This means those who act now and can lock in now to a fixed deal – where your rate is set for a period of time – may find they can avoid paying more.
Martin said: “UK interest rate rises are likely coming and coming soon, so this is a clarion call.
“Everyone with a mortgage, you need to check now if you’re on the best deal before it is too late.”
The Bank of England will next meet on November 4.
If the central bank does decide to increase the base rate, it will be announced that date.
Here are the three steps from Martin for checking if you could save money on your mortgage:
1. Gather your current mortgage information
First of all, find out all the relevant information about your current mortgage deal so you know what you’re comparing against.
“Get your mortgage information together. Your rate, your type, when the deal ends, the terms and are there any switch penalties,” explained Martin.
“The most important thing to understand is the loan to value; that is the proportion of your home’s current value that you borrow.
“The reason I’m stressing current here, is because many people’s house price has gone up so they’re worth more.
“So even if you’re borrowing hasn’t dropped, it means your loan to value may be lower which means you may be able to get a better mortgage.”
2. Find your lender’s cheapest product transfer
Once you’ve gathered the above information, go to your existing lender and see if you can do a product transfer.
This is where you switch to another deal but with the same mortgage provider, rather than switching lenders.
“This used to be not a good rate but these days existing lenders can forgo affordability checks, which can help acceptance,” said Martin.
“They may have lower fees and obviously less paperwork.”
3. Use a mortgage comparison site to check other deals
Finally, go to a mortgage comparison website to check what the cheapest deal out there is right now to see if you can save more by changing lender.
But, keep in mind you need to factor in any fees that come attached with your respective deal and not just the cheapest rate.
“Especially if you’re doing a smaller mortgage, fees are disproportionately affected,” said Martin.
“What I would do is, say you’ve got a two-year deal, divide the fee by 24 months and add that on to the mortgage to compare.
“As to whether you should fix or not, if certainty and being able to budget is important to you, the more you should fix.”
Other things to consider when it comes to mortgages
If you’ve found a better deal where you would be able to save, you then need to consider the practicality of moving.
For example, will you be accepted and pass all the relevant credit checks?
You can check your credit score for free online with the three main agencies, Equifax, Experian and TransUnion.
Lenders will also complete what is known as a “stress test” to see if you’re really able to afford your mortgage.
This is where they’ll look at your income and outgoings to determine what you can afford to pay.Internet Explorer Channel Network