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Fix a mortgage now to beat rate rises, says MoneySuperMarket

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MoneySuperMarket is urging consumers to fix their mortgage deals now after Bank of England Governor Mark Carney gave his strongest indication yet that interest rates could rise at the turn of the year.

With mortgage rates at an all-time low, recent stamp duty reforms and the upcoming Help to Buy ISA aimed at boosting first time buyers’ deposits, there has never been a better time to get a mortgage, according to the comparison site. The firm is urging consumers to fix their deals now before they’re hit with increases.

MoneySuperMarket analysed market leading two-year and five-year fixed rate mortgages and fees, calculating how much money in total a mortgage holder would pay. Currently, the leading five-year deal offers a fixed rate of 2.14 per cent, and comes with a booking and arrangement fee of £1,675. This total paid back over five years for someone borrowing £150,000 is £40,435. In 2008, the best five-year fixed rate mortgage came in at 4.89 per cent. Although associated fees were £1,094, the total cost to be paid back amounted to £53,114 – which is a huge £12,679 more than today’s best offer.

The same applies to two-year fixed rate mortgages. In November 2008, the leading mortgage rate on offer was 4.79 per cent with fees of £995, meaning that the total paid back over the period amounts to £21,611. The best two-year fixed rate now is 1.05 per cent with fees of £1,995, but the total cost owed is £15,651 – a saving of £5,960.

MoneySuperMarket recommends prospective homebuyers investigate deals while they last. The comparison site notes many lenders allow rates to be ‘booked’ up to six months in advance. Anyone on a high standard variable rate (SVR) with their current lender could see their monthly payments shoot up by an extra £264 annually in the event of a 0.25 per cent base rate rise. Currently, the average SVR for existing borrowers is 4.84 per cent – on a typical £150,000 over 25 years, this equates to £863 per month in repayments. A base rate increase of just 0.25 per cent could push up a monthly payment to £885.

“The current mortgage climate is the brightest it’s been for some years, with rates at an all-time low – however, fervour about a potential rate rise is likely to make lenders jittery, and we could see them pricing this into their available deals soon,” said Dan Plant, consumer expert at MoneySuperMarket.

“If you are in a position to fix right now, doing so will get you security at a cheap rate. Even if your current deal doesn’t end until December, many lenders will let you reserve rates that are available right now, for up to six months for a small fee. If you are able to do this, you could ward off the possibility of a huge jump in repayments, which you may see if you waited till your deal ends.

“Of course, buying a house is a huge investment, and prospective buyers must not rush into any decisions. When comparing mortgages it’s vital to work out the total cost over the term of the deal, taking both rates and fees into account. Don’t automatically be put off by high fees, as it may be worth paying this to benefit from the lowest interest rate. Costs can vary greatly between providers so taking the time to work out the total amount you have to repay over the term of the offer is essential.”


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