Those on a variable rate mortgage are likely to see their monthly repayments go up after the Bank of England hiked interest rates – but Martin Lewis’ website is urging you to check if you can save money now
Martin Lewis ’ MoneySavingExpert website has urged everyone to check their mortgage after interest rates were hiked.
The Bank of England last week confirmed it would increase its base rate from a record-low 0.1% to 0.25% as it looks to cool inflation levels.
For those with a mortgage on a variable rate, this does mean monthly repayments are likely to rise as a result.
Banks including Barclays, Lloyds, TSB and Santander have already confirmed increased rates to their mortgages.
Tracker rates rise and fall in line with inflation, so will go up by 0.15%, while those on a standard variable rate (SVR) are likely to see costs go up by the same amount too.
But MoneySavingExpert has urged households to check if they can save cash by switching their deal now – and say some people could save thousands of pounds.
The consumer website points out that rates for switching your mortgage now are “ultra low and had largely priced in last week’s rise”.
But it added: “They may not stay low for long as many economists also expect further base rate rises in 2022 to combat soaring inflation.
“So everyone with a mortgage should at least check their situation and see if they can save £1,000s by switching.”
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Schemes to help First time Buyers get on the ladder
If you are already on a fixed-rate mortgage, your monthly repayment won’t be affected by interest rates.
This is because a fixed-rate mortgage charges a set rate of interest for a set amount of time.
Check if you can save money on your mortgage
MoneySavingExpert recommends first checking the terms of your current mortgage deal – including the type, rate and how much you’re repaying each month.
Those on an SVR mortgage can switch at any time and are “likely already massively overpay”.
“On a £150,000 repayment mortgage, a typical 4% SVR costs about £2,300 a year more than the top 0.89% 2yr fix after fees,” notes MSE.
New analysis from Experian and L&C Mortgages also suggests homeowners could save as much as £5,000 by locking into a cheaper deal now.
If you’re on a tracker mortgage that ends within six months, you should be able to leave penalty free – so again, it is worth comparing deals elsewhere to see if you can save.
For those locked into an expensive fixed-rate deal that hasn’t yet ended, you will have to pay an exit fee – but it could be worthwhile if the savings you’d get from another provider are massive.
Homeowners will need to act fast to lock into a cheap fixed-rate deal – and banks have been slowly increasing their rates since November in anticipation of a rates hike.
We’ve got a guide on how to find the best mortgage rates here.
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.