Homeowners should look at fixed-rate deals before they ‘head north’
Many lenders have hiked rates on fixed rate products in recent days after Bank of England governor Mark Carney hinted strongly of a base rate rise before the end of the year, according to John Charcol senior technical manager, Ray Boulger.
Speaking to our sister title, Mortgage Solutions, Boulger said Nationwide, the biggest building society, has raised the rate on its cheapest two-year fixed deal from 1.19% to 1.44%. The worry is that rates on fixed packages could rise further after an interest rate hike.
Boulger said: “Rates are not going to come down even though they won’t go up very quickly. If you are paying a standard variable rate (SVR), you are paying at least 3.75%. It doesn’t really pay to wait if rates are going to rise, you might as well see what’s out there because if you are on SVR, you could be paying over the odds against a fixed-rate product that locks you into something lower in a rising interest rate environment.”
Though of course, it may not be straightforward as advisers and borrowers would have to check whether net monthly savings were not “gobbled up” by switching charges and, possibly, other fees, too, he acknowledged.
But locking into competitive fixed-rate options or similar products was something to consider. Boulger added: “There are quite a few good term discount products on the market with no early repayment charges with rates starting under 2%, some of which have free legal fees and free valuations.
Boulger also noted there was no merit in waiting to check on fixed rate products in the current climate as rates were now “almost without doubt heading north”.