Mortgage warning as millions face surge in repayments within 3 years

Caller says he’s ‘fed up with having to subsidise cheap mortgages’

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Research from Comparethemarket found 55 percent of homeowners are coming to the end of their fixed term within three years. These Britons risk being hit by much larger interest rates when they switch deals, with rates expected to remain high in the coming months.

The average two year fixed rate deal from the big five lenders, as of October 7, was at six percent, which was higher than the average standard variable rate (SVR) deal at 5.44 percent.

As of October 10, the average five-year fixed rate for mortgages had risen to 6.19 percent.

Alex Hasty, director at Comparethemarket said: “We understand it is an uncertain and difficult time for many homeowners, as SVR and fixed term rates rise, the number of mortgage products fluctuates, and the cost of living crisis deepens.

“Those soon coming to the end of their fixed rate deal are likely to face a big repayment shock, even if they’re remortgaging.

“For these homeowners, it is best practice to remortgage rather than switch onto your lender’s higher standard variable rate.”

The comparison expert urged homeowners to look around at the different deals on the market before making their decision.

Mr Hasty added: “It’s important to compare mortgage products online – checking the available deals now and staying aware of what is happening in the market will help you to prepare your budget and save for the future.”

He also suggested comparing policies on existing bills, such as motor and home insurance, to help keep costs down.

At present, 16 percent of homeowners are on a SVR mortgage and could be paying much higher interest rates compared to those on fixed term deals.

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The research found almost nine in 10 homeowners are concerned their mortgage payments increasing will impact their ability to pay their everyday bills.

People said they opted for a fixed term deal because of the certainty of repayments for a fixed amount of time and as it offered protection against rising interest rates.

The Bank of England has continued to increase the base interest rate over the past few months, which is currently at 2.25 percent.

Money Saving Expert’s Martin Lewis warned this week of a “ticking time bomb” when it comes to mortgages.

Appearing on ITV’s Good Morning Britain, he urged the central bank and industry regulators to step in to improve the situation.

The financial expert said: “Look at forcing the banks with the extra money they’re making by putting mortgage rates up and not putting savings rates up, at much stronger forbearance measures for people who can’t pay.

“Now, if they can do that by Christmas, (when) it needs to be done, then we probably won’t need a bailout next spring if interest rates go up as predicted.

“But if they don’t get their skates on and do it quickly, then we may be in the position where the only way to sort this out, as we lend up with energy because the warnings were not heeded in time, is that we’re going to have to start throwing money at it.

“There is time to restart. If you’re watching: regulator, Bank of England, Government, you need a mortgage emergency plan now, or there’s a ticking time bomb in my opinion.”

Jinesh Vohra, the founder and CEO of Sprive, is advocating for mortgage holders to make overpayments if possible to beat rate increases in the months ahead.

He said: “In these times of major uncertainty, we want people to know that actually, one of the best things they can do right now, that will make even more sense as rates rise, is make overpayments on their mortgage to save potentially tens of thousands of pounds.

“If mortgage holders can start doing this now, they will not only be saving themselves an increasing amount of money, they will be actively fighting back to reduce the future cost of rising mortgage rates.

“When so many are worrying about what on earth they can do given all the change and market turmoil, making overpayments is a rare universal truth – a great move to make if you can afford it.”

Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip.

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