Claer Barrett offers advice on locking in fixed rate mortgages
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A mortgage is one of the primary outgoings for millions of people right across the country. Many will be grappling with the payments given the cost of living placing increased strain on pockets.
But rising interest rates have created further misery for mortgage payers, who are facing increased repayments.
According to Moneyfacts, the average rate for a two-year fixed rate mortgage has hit 4.09 percent.
This is the highest level recorded since February 2013.
Only a year ago, the average two year fixed deal was available at a rate of 2.45 percent – illustrating a marked difference.
It means the average monthly repayment on a £250,000 mortgage will have increased from £1,115 to £1,322 in a year – rising by £217 per month.
According to nous.co, as many as four million families in Britain are thought to be on fixed rate deals which are set to expire in the next 12 months.
This increases to almost six million if for those whose deals end in the next 18 months.
These individuals are set to receive a substantial shock when entering an environment with much higher repayments required.
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As a result, Jonathan Burridge, founding adviser at We Are Money, has urged Britons to act as soon as possible on their mortgage.
He said: “I would recommend clients to act as early as possible if their rate is coming to an end.
“There is a view that we have seen all the base rate movements for a while, but the market is uncertain and there is still plenty of risk of further rises.
“With more and more lenders providing offers valid for six months on remortgages, it is possible to start planning seven to eight months ahead of the approaching end date of an existing deal.”
Those who prefer certainty when it comes to their mortgage may wish to lock in for a long period of time.
However, inflation will fall back to normal levels soon enough, with the Bank of England having a two percent target.
If it does so, then the central bank will need to cut interest rates and it could mean individuals miss out on a better deal.
It is simply a waiting game to see how the markets will react, and some may not wish to take a risk.
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Certain Britons may be looking to increase the term of their mortgage to spread out costs.
However, according to Lewis Shaw, founder at Shaw Financial Services, this should be carefully thought about before being actioned.
He added: “Anyone looking to increase the term of their mortgage should be aware that you’ll likely end up paying more in interest over the term.
“But that is preferable to not making ends meet and getting into financial difficulty.
“Finally, remember that while inflation is biting us at the moment, the value of your debt is shrinking as long as your wages are going up relative to the rate of inflation.
“So maybe it’s time to ask for that pay rise.”
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