With base rate now at its highest level since the summer of 2001 and with further rises on the cards, according to many city analysts, it's time to look at the increased repayment costs and the options and rates available post the latest rate hike.
For anyone coming to the end of a two year fixed rate deal, they are likely to be paying around 4.6 per cent, but if they are looking to tie into a new fixed rate mortgage for a similar term, they can now expect to pay upwards of five per cent. If you're looking at an average UK 25 year mortgage of £150,000, the rate increase means an additional £49 per month, or to put it another way, £1,616 including lending fees, over the next two years.
People who locked into a three year fixed rate mortgage when the market was at a low point and base rate was 1.75 per cent lower than now will also feel the pinch. Using the same scenario as above, monthly repayments on a 25 year £150,000 mortgage will rise by around to £50, if you take the current three year best buy mortgage from Loughborough BS at 5.25% with £349 lending fee as an example.
It is always a dilemma when deciding what to do with your mortgage. Should you look at a short tem fixed or variable rate deal in the hope that rates will have reduced come 2009, or do you lock into a five or even ten year deal now, knowing that you can comfortably afford the monthly repayments and that it will be one less thing to think about for the foreseeable future?
Some lenders have reported that the third base rate increase since last August has changed mortgage buying habits, with more people now opting for longer fixed rate deals.
When looking to switch your mortgage to a new lender, there is much more than the interest rate to consider. Your existing bank or building society will charge you an exit fee of anything up to £295, and your new mortgage provider will ask you to pay an arrangement/lending fee for your new fixed or discounted deal. You may be shocked how high some of these fees have become during the last few years.
Check out the latest mortgage rates to see what's currently available. As ever, if in doubt about what is best for you, speak to an Independent Financial Adviser.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.