Borrowers urged to fix their mortgages as the news they have been 'dreading' arrives
Experts have urged borrowers to consider taking advantage of the range of low-priced, fixed-rate products available in the marketplace before interest rates start to rise. With Bank of England governor Mark Carney suggesting that the base rate may increase in the next few months, now could be the last chance to bag one of the 'best-buy' mortgage deals before rates start to creep up.
A potential rate rise is the scenario that millions of borrowers 'have been dreading'. Recent comments from the governor of the Bank of England have suggested that the base rate will increase later this year from its current level of 0.5%. Interest rates have been at this record low for over six years and the Daily Express reports that a possible rate rise is “the news that mortgage borrowers have been dreading”.
Mark Carney expect interest rates to rise by around 2.5% over the next three years, meaning millions of borrowers on their lender's standard variable rate (SVR) could end up paying 6% or 7%.
Experts have urged borrowers to take advantage of the raft of record-low deals in the marketplace and to protect themselves against potential rate rises. Although the base rate is not expected to rise until late 2015 lenders are set to price future rate rises into the cost of their mortgage deals.
Dan Plant from a leading price comparison website says “the current mortgage climate is the brightest it has been for some years” while mortgage expert Simon Tyler told the Daily Express that "if you are in a position to fix, doing so now will get you security at a cheap rate”.
Can you commit to a long-term fixed rate?
The newspaper reports that a 0.25% rise in the Base rate would increase repayments on a £150,000 mortgage by £21 per month. This could be a particular headache for borrowers who have stretched themselves to buy or those who have bought recently at higher property prices.
Keith Osborne, editor of new homes portal Whathouse.com, says: “If you can commit to a mortgage for the long term then a five- or even ten-year fixed rate may be the right thing for you to do. There are some exceptionally low rates around at the moment and it's unlikely that they will fall even further.
“However, the issue with these deals is that if your circumstances change during the fixed period you will often face penalties if you want to repay part or all of your mortgage. Think carefully about whether you are able to commit for a long-term fix.”
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