Martin Lewis talks about rising interest rates on mortgages
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The warnings come as five high street lenders put their mortgage rates up today signalling that others will soon follow suit. At the same time, the Office for Budget Responsibility (OBR) forecasts that rising inflation could prompt the Bank of England to raise interest rates from 0.1 percent to 0.75 percent by the end of the year.
Barclays announced this morning it was increasing some of its rates by up to 0.35 percentage points while Halifax put its rates up by 0.20 percent.
NatWest, HSBC and TSB have also confirmed that their rates are going up as experts warn people to prepare for the biggest hike in interest payments since the financial crisis of 2007 to 2008.
Personal finance experts at AJ Bell warned that this could make a typical family’s mortgage around £600 a year more expensive.
Laura Suter, head of personal finance at AJ Bell, said: “The OBR has issued a stark warning to homeowners: be prepared for soaring mortgage costs in the next few years.
She added: “Buried deep in the Budget documents are figures showing that the OBR expects mortgage interest costs to start rising next year, before hitting a 13 percent increase in 2023.
“Someone with £250,000 of borrowing who fixed earlier this year and renewed in 2023 would see £600 a year added to their mortgage costs, while someone with £450,000 of borrowing would see their costs hike by £1,068 a year.”
Meanwhile, other commentators said a rise in mortgage rates was inevitable and, although price rises are never welcome, there are some things British homeowners can do to offset the hike.
One way of keeping mortgage repayment costs down is by re-mortgaging every time the fixed rate comes to an end.
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Almost 60 percent of the population are on a fixed rate deal and would benefit from re-mortgaging every couple of years.
Despite the fact that it can save a household thousands of pounds, almost half of the British population think it’s too much hassle.
That’s according to a survey carried out by Barclays Mortgages which found that 49 percent believe the hassle and paperwork of re-mortgaging simply wouldn’t be worth the financial savings.
But, according to Barclays, this is simply not true.
A spokesperson for Barclays Mortgages, which commissioned the research, said people find mortgages difficult to get their head around.
“It’s clear from our research that many find re-mortgaging a tricky subject to understand, even though UK adults have been on the mortgage payment ladder for an average of 13 years and five months,” the spokesperson said.
“As a result of lacking knowledge in the subject, homeowners are sticking with what they know and not exploring new options when it comes to re-mortgaging.
“With the average amount left to pay on a mortgage at 45 percent, re-mortgaging sooner could end up saving them money – not only month to month, but over the whole of their mortgage-paying life.”
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Anyone on a fixed rate mortgage should find out when their deal comes to an end, although they can start the process up to 90 days before.
Some people might prefer to look for the best deal themselves or they can appoint an expert to do it for them.
Mortgage brokers are usually paid a fee by the banks so it shouldn’t cost homeowners a penny.
Alternatively, not re-mortgaging and automatically going onto the lenders standard variable rate could however cost thousands more in higher interest rates.
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