HOME BUYERS get ready for a bumpy ride.
Of interest rates rising and more than a decade of cheap loans comes to an abrupt end, mortgage payers worry about what to do.
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Repayments have already risen due to higher interest rates aimed at combating inflationthan the consequences of Chancellor Kwasi Quarteng’s mini budget scared markets further.
It caused lenders to close fixed rate deals from the market because of fear of the cost of borrowing.
More than 1,500 mortgages were withdrawn in two days.
Average rates yesterday, for the first time in 14 years, reached six percent of the remaining two-year and five-year fixed deals — and experts say there are likely to be further increases.
This raises questions like: Do you have to pay a fee to get out of your existing deal now and take out a new fixed-rate mortgage before the interest rates get even higher?
The Sun’s Head of Consumer gives her expert advice. . .
What should I do now?
Double check which type of mortgage you have – fixed or variable? – what your rate is, when the deal ends and what the penalty may be for leaving early.
If you have a firm deal, determine when your bills will increase and by how much.
Take for example someone who in December 2021 took out a fixed mortgage of £200,000 for two years with a term of 25 years and who pays 2.34 percent.
They will pay an additional £420 per month when their fixed term ends in December 2023, according to Money Facts.
Is it worth paying a fine to get out of my existing deal?
Many lenders allow you to make an offer three to six months before your current deal ends.
Either way, it’s worth doing your sums, but Nick Morrey, technical director at mortgage brokers Coreco, says: “It’s not an easy math.”
If you’re considering terminating your current deal early, you’ll need to factor in any early repayment fees, plus any fees for closing a deal. new mortgage.
And that’s before you start comparing the interest rate on your existing mortgage with a new one.
A good starting point to help you do the sums is: MoneySavingExpert’s Ditch Your Fix Calculator (bit.ly/3T2QEm1).
Which is better, a fixed or variable deal?
Everyone should consider their own personal circumstances to find the best mortgage to meet their needs.
Variable and tracker mortgages may currently look cheaper than a flat ratebut they will rise if – or more likely when – the base rate goes up again next month.
Those who value the certainty of knowing how much they will pay each month should opt for a flat rate.
Mortgages can be confusing, but a broker can help you navigate the maze.
They can earn commission from lenders after arranging a mortgage, and some will also charge you a fee, which is either a flat rate or a percentage of the amount you want to borrow.
Make sure to speak to a broker in the entire market so that they can access all the deals available, not just a select few.
Always check whether your broker is authorized to provide mortgage advice through the Register of Financial Services.
Should I Plow My Rainy Day Fund to Lower My Mortgage?
Check which costs or fines you can receive for the extra repayment of your mortgage.
Many lenders let you overpay ten percent of the balance each year with no penalty, and paying off that little bit extra can lower your payments and interest.
But before you put money into your mortgage, make sure you pay off more expensive debtslike credit cardsand set aside enough money to pay for three to six months’ worth of essential costs bills.
I am a new buyer, what should I do?
It can seem like a particularly scary time to make that first jump into owning a home, even with the stamp duty threshold for new buyers now being £425,000.
But that doesn’t automatically mean buying a house is off the table.
Nick says waiting in case house prices fall isn’t necessarily a smart move.
He adds: “My advice to first-time buyers is that if you are in a position to buy and you can afford the mortgage and you don’t plan to sell it in the near future, you should strongly consider moving on. to go.”
What should I do if I am having trouble paying my mortgage?
Contact your lender.
Nick says, “They have a duty of care to make sure you know your options and to take steps to help you where they can.”
You can also get free one-on-one debt counseling from: Citizen adviceStepChange or National Debt Line.