Martin Lewis explains what to do during ‘perverse’ mortgage crisis

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Martin Lewis brands the mortgage market 'perverse'

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Martin Lewis has called the current mortgage crisis “perverse” and “unprecedented” and shared his suggestions on what people on standard variable mortgage rates and fixed rate deals coming to an end can consider. The Money Saving Expert founder warned Good Morning Britain viewers that rates could increase massively over the next year. 

Speaking on the ITV show, Martin Lewis said: “The mortgage market is perverse right now – we even have an inverse yield curve where 10-year mortgages are cheaper than five and five can be cheaper than two years.

“So if you can fix for longer that is worth looking at.

“Absolutely if you have a variable rate mortgage or a fixed coming to an end in the next three, four, five months I would be looking at trying to get a mortgage now.

“Go onto a comparison site to see what’s available for you, then check your existing company to see what it will give you and then mortgage brokers are worth their weight in gold right now – go and get yourself a mortgage broker.”

He continued: “And those thinking of breaking their fix and there is a logic to it but it’s not right for everyone, you want the mortgage broker to do those numbers.

“But I think we need to remember if the prediction is right mortgage rates are going to go up, the UK interest rates are going to go up to six percent – that will be catastrophic for mortgage holders.

“First of all because for every one percent your mortgage goes up you’re paying £600 a year more per £100,000 of mortgage.

“They’ve already gone up three percent compared to last year so that’s £1,800 – if it goes up another three percent that’s £3,600 a year per £100,000 of mortgage and many peoples’ mortgages are bigger.”

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The financial journalist said that’s not the only problem Britons are facing right now.

He added: “The second problem if UK rates go up to six percent is those are the cheap rates but once you start applying you have to pass an affordability check clearly many people will start failing affordability checks.

“So they’ll have to stay on their own companies deals or go on a variable rate and worse because we now have a risk to house prices.

“That’s not a prediction I’m saying there’s a risk house prices may drop – they may not and they may continue to go up – but if house prices drop that will hurt peoples’ loan to value ratio which will make it even more difficult to get a cheap mortgage.

“So there is a ticking timebomb if UK mortgage rates follow what the market is predicting and interest rates go up to six percent.”

Mr Lewis’ warning comes after Virgin Money, Halifax and The Skipton Building Society removed some of their mortgage deals following rising interest rates and uncertainty in the markets.

Sam Richardson of Which? Money, said 935 motgage deals have been pulled in total leading to “turmoil in the mortgage market”.

Katie Brain, Consumer Banking Expert, Defaqto said this figure has now risen to 3,000 mortgage products being withdrawn from the market.

She said: “Nearly 3000 mortgage products have been withdrawn, and over 20 providers have withdrawn their entire fixed rate mortgage range.”

She continued: “What products are left are changing at a rapid pace, lenders seem to be really unsure of what to offer and what price with so many changes in the money markets at the moment.

 “Unfortunately for borrowers this means that the cost of a mortgage has increased, some providers increasing their fixed rates by more than 1.50 percent, when the base rate only increased by a fraction of that.

“However, interest rates on best buys for five Year Fixed rates have not increased as much as the two Year Fixed rates, so if you are someone who is on a variable rate and are looking to fix, or coming to the end of a current deal then now is the time to act as interest rates are changing daily.

“Many of the best rates are only available direct through a lender so it is worth contacting your existing lender, or bank you have other accounts with, to see what they have to offer. We can only hope that the situation calms down soon, so at least borrowers can seek alternative mortgage deals should they need to.”

Good Morning Britain airs weekdays on ITV from 6am.

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