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Don't get left in a mortgage fix By Jeff Salway
More than 2.3 million homeowners took out a fixed-rate mortgage in 2004 and 2005. If you were among them, four interest rate hikes in the past 10 months mean your monthly repayments could soar as your deal comes to an end this Here's our step-by-step guide to securing the best deal for you. What will happen? If you don't act before or when your fixed-rate deal ends, you will automatically be transferred onto your lender's standard variable rate (SVR), which could be as high as 7.75%. If you had previously been paying the average fixed rate in 2005 of 4.49%, your monthly repayments on a £125,000 repayment mortgage would increase by £250 from £694 to £944. What should I do? Around three months before your mortgage deal ends, shop around to see what other lenders can offer you. However, if you don't have that much time, just start as soon as possible. It's worth speaking to your existing lender, but it's unlikely they will be able to offer you the best deal on the market. It is a good idea to speak to an FSA-regulated mortgage broker, they will help you find the right deal for you. Type of deal While fixed rates remain popular in securing the size of your monthly repayments, you can expect to pay more for the privilege now, with the average three-year fix at around 6.05%. There are lower fixed rates of around 5.5% if you look hard enough, but if you believe speculation that rates are at their peak, it may be worth going for a tracker or discounted-rate mortgage. Initial rates are lower and you'll benefit from future base-rate cuts. Small print While the rate on your mortgage will be important in determining the size of your monthly repayments, there are number of other factors to bear in mind. Consider whether you need a flexible product, which allows under and overpayments, in addition to arrangement fees, and penalties if you pay off your mortgage early. Good customer service is also a big factor.
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