Britons who are not on fixed mortgage rate deals risk their lenders raising their monthly payments up to £50 a month. On the Money to the Masses Podcast, personal finance expert Damien Fahy discussed these potential rises, and how Britons can potentially avoid them.
He said: “The majority of people are on their lender’s standard variable rate which means they can move it [mortgage repayments] up and down as they please.
“And it usually has a reference with that Bank of England base rate so when it raises interest rates it means that people’s mortgages leap up.”
With inflation on the rise and set to reach at four percent by the end of the year, the Bank of England could increase interest rates to try and bring inflation down to the controlled two percent target.
He explained that if the interest rates do rise, so will the fixed mortgage rate deals as lenders will raise their prices.
Mr Fahy said: “You’re talking about a 0.5 or 0.6 percent increase on the deal I’ve mentioned which will push your repayments up to £775 to £832 – so more than a £50 a month increase for the best deals out there.
“The message is mortgage rates are going up if the Bank of England do raise the interest rates.”
Mr Fahy said people should speak to mortgage advisors who can look at the market as a whole and find the best deals for each person based on their circumstances and their earnings.DON’T MISSDave Ramsey suggests how woman, 59, with no pension savings can get by in retirement [INSIGHT]State pension ‘won’t give a nice retirement’ – Britons urged to make ‘other investments’ [EXCLUSIVE]‘A real boost to retirement savings’ – the ‘generous’ alternative to pensions explained [INSIGHT]
He said: “Look at your mortgage, review it this week and decide if you’re going to fix and then do it.”
A fixed-rate mortgage charges a set rate of interest that does not change throughout the loan time period.
People may wish to get fixed mortgages as it is “sensible” if they want to keep their mortgage rates at a set level amidst the uncertainty of interest rates.
Mr Fahy urged Britons to speak to a mortgage advisor if this is a switch they wish to make.
He explained the reason behind the predicted mortgage rate increase is due to the change in markets.
With the shortage of imports resulting in higher costs for basic raw materials and vital components, the financial markets have brought forward their forecasts for interest rate rises.
They predict the Bank of England will raise interest rates on December 16 in their Monetary Policy Committee meeting, increasing the rate from 0.1 percent to 0.25 percent.
Mr Fahy said: “That doesn’t sound a lot, but it will prove significantto people. It will add tens of pounds a month on the average mortgage in the UK.”
He suggested listeners use a mortgage calculator to find out how much their monthly mortgage payments may increase by.
He continued: “Let’s say you have a mortgage of £200,000 over 25 years, and you put in the interest rate you’re paying and then you put in the increase of the base rate that you think might happen.
“It will then tell you in pounds what your mortgage payments could rise to.
“Play around with it and get a sense of reality for when the Bank of England raise interest rates.”
This increase will only affect people who do not have fixed rate mortgages.Internet Explorer Channel Network