The MoneySavingExpert founder said the cost of mortgages is likely to increase this year, but that home loan rates are still pretty low so closing a deal now could be a good option
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The founder of MoneySavingExpert (MSE) said that in October 2021 there were more than 50 mortgage deals below 1% and the cheapest fix was 0.84%.
Today the cheapest is 1.79% – that’s an extra £800 a year on a £150,000 mortgage, Lewis said in the MSE Newsletter this morning.
Lewis said things are “probably going to get worse” because of the Bank of England. Set base rate last week from 0.5% to 0.75%.
This interest rate is factored into banks’ interest rates on their mortgages.
Further hikes in the policy rate are expected, and analysts at Capital Economics expect it to reach 1.25% by the end of 2022 and 2% in 2023.
But Lewis said: “Even though mortgage rates have risen, they are still cheap in a longer historical context. This is especially true for the cheapest longer fixes, which are currently just a touch more expensive than shorter ones and give security for much longer.
“That means anyone who has a mortgage that isn’t already tied to a decent rate for the foreseeable future should see if there’s a better deal out there. Even if your deal ends in six months, there are options to close it.”
You don’t even have to be at the end of your mortgage term to get involved in a new business.
Many banks allow you to take out a new mortgage up to six months before your current one expires.
Lewis said tracker mortgages are often cheaper than fixed-rate loans, but these move in line with the base rate whenever there is a change.
Those who “value security” might be better off with a fixed price, which also helps with monthly budgeting, he said.
Debt restructuring tips from Martin Lewis
1. Find out the details of your current mortgage
This includes the interest rate, monthly repayments, and outstanding debt.
Homeowners should also find out what type of mortgage they have and the term – how long you have to pay everything back.
Most importantly, also check to see if you have a prepayment penalty — a fee that’s due if you switch too soon.
2. Look at the cheapest offer from your current lender
Taking out a new mortgage with your existing lender is called a “product transfer.”
The main benefit is that your lender can avoid the usual affordability checks they perform on new customers.
It can also mean paying lower fees and it’s less of a hassle in terms of paperwork.
3. Compare what offers are available
Once you know what your lender’s best offer is, go and check out their competitors. A mortgage broker can help, although many charge a fee.
4. Use online calculators to find the best deals
MoneySavingExpert has tools to help you find the best mortgage for you:
5. Work out the best offer for you – and do your best to be accepted
When you refinance, a lender performs financial checks on you.
Lewis said making sure you have good credit can help improve your prospects.
He advised the British to do so Check their credit file (free) to ensure there are no errors.
Reduce loan applications and pay off debt when you can.
It can also help to spend as little as possible in the months before applying for a mortgage.
They want to see that you can afford to pay back, so spending less before applying shows them you can be frugal.
6. Consider using a good broker
Not only do brokers compare the entire market for you, they can also get access to exclusive offers that you as a member of the public might not get.
A good broker can also argue your case with a lender if they initially say no to giving you a mortgage.
This is especially important if you have something unusual about your case, such as: B. bad credit, or if you are trying to buy a non-standard home.
https://www.mirror.co.uk/money/martin-lewis-urges-homeowners-lock-26534715 Martin Lewis is giving an urgent warning of £800 a year to anyone with a mortgage