be a good bet for some people, who may be able to save more than £200 (US$271) a month, or over £2,000 (US$2,706) a year, just by making a fairly simple switch. “Mortgages are the one aspect of good news here, because there is still something you can do about the cost,” David Hollingworth at the broker L&C Mortgages told the Guardian. “You can ease the pressure elsewhere by taking appropriate action.”
This appropriate action that can be taken by the borrower will depend on the circumstances. For instance, if you are on a lender’s standard variable rate (SVR), you may be already aware of the increase in your monthly bill following the Bank of England’s rate hike in December and you are set to face another increase of 0.25 percentage points.
However, this may not be the case for customers of HSBC and Yorkshire building society, both of which have not passed on the increase. In the case of Yorkshire’s SVR of 4.49 per cent, you may be able to cut the cost of your repayments by moving to a better deal like the five-year fix at First Direct at a rate of 1.54 per cent. This would enable the borrower to cut as much as £222 from their monthly repayments, saving £2,169 a year once you’ve taken the £490 fee into account.
On the other hand, if you have a tracker mortgage, you’re definitely feeling the effects of interest rate rises and remain concerned about projection of the base rate reaching 1.5 per cent next year. According to experts, if your deal has no early repayment charges (ERCs) it would be sensible to shop around for a better deal. However, if you do have ERCs, check how much they are. Usually, as the end of the deal looms, the percentage goes down. And in order to make these charges worth paying, the borrower should be of the view that rates are rising so quickly that whatever you can lock into at the end of the deal would cost you more than that over the term of the next deal you lock in to.
If you are one of those borrowers whose fixed rate ends this year, you may consider applying for a new deal up to six months before you need to switch. Another enticing option is locking your mortgage for 10 years. The cost of such 10-year fixed deals have fallen following the reduced rate of 1.66 per cent offered by Lloyds for remortgagers. This, according to the experts, is one of the cheapest 10-year deals to date, and may trigger similar rates among other lender as well.
