Savers may benefit from the Bank of England’s base rate hike to one percent, but the increase will hit mortgage borrowers and businesses worse, who face higher borrowing costs. On The Martin Lewis Money Show: Live this week, the money saving expert responded to listener concerns about what the base rate rise could mean for mortgages.
Krishna emailed in saying that his fixed rate mortgage was coming to an end. However he didn’t know whether he should be looking at a two year fixed deal, or five year fixed deal next.
The money saving expert explained he had “some real concerns” about the mortgage rates at the moment.
Six months ago people could get mortgage deals below one percent, however now, the cheapest fixes are now double that at 2.1 percent so the cost of getting a mortgage is going up, he said.
Mr Lewis continued: “If I’m honest I have some real concerns about mortgages right now.
READ MORE: ‘My whole life’s savings’ Single mum shocked after losing £60,000 to scammer – ‘evil man’
“This is the concern – we are seeing rates go up but you also have to remember that to get a mortgage and get accepted, you have to pass a credit check and an affordability check .
“An affordably check examines have you got room to pay this mortgage? Now we are clearly in the midst of a cost of living crisis so everyone has less room than they did before because other costs have gone up.
“So my great fear is we’re seeing interest rates go up and fewer people are going to be accepted when they apply for a cheap mortgage because more are going to fail affordably checks.”
With more people being failing affordability checks, the money saving expert thought that left Britons with a “ticking time bomb”.
“Speak to a mortgage broker for help.
“If rates are going up and you want certainty and you can get a cheap five-year deal, then you can get certainty.
“I can’t promise it will be cheaper when you look back in hindsight but if you want peace of mind in an uncertain world and boy are we in an uncertain world – then fix and fix longer.”
As mortgage rates continue to rise, Martin Lewis has warned homeowners to start fixing now to avoid potentially crippling increases to mortgage repayments.
Will Rhind, Head of Mortgage Advice at Habito, commented on Mr Lewis’s suggestions. He said: “Martin Lewis spoke about a ‘mortgage ticking timebomb’ on the Martin Lewis Money Show Live and voiced his concerns over rising interest rates and the changes in consumers’ affordability in the face of the ongoing cost-of-living crisis.
“With four rate rises already rolled out in under six months we expect that UK homeowners with an existing mortgage will see very different rates when they next remortgage. We’re urging all mortgage holders with six months to go until the end of their fixed rate to speak to a free whole of market mortgage broker to explore the options available to them now so that they can start planning ahead during these unsteady times.
“Remortgagers should keep in mind that if they opt to fix for two years at a time, they might end up remortgaging up to 10 times over the life of the average mortgage. Most deals come with a £999 fee payable each time, meaning that this cycle of remortgaging could cost around £10,000 in arrangement fees alone.
“Homeowners might do better to explore a longer-term fix of 10+ years or more to give themselves protection against further interest rate rises and uncertainty for the duration of their mortgage.
“With Habito One for example, the interest rate is guaranteed for longer, right up until you pay it off. There are no early repayment charges or exit fees, meaning homeowners have complete flexibility and freedom to leave at any time, switch deals, make unlimited overpayments, move home, or pay off their mortgage early without any penalties or hidden fees.”
The Martin Lewis Money Show: Live is available to watch not on the ITV Hub.