MARTIN Lewis has urged homeowners to check their mortgage deals which could save £1,000 off their bill.
The Bank of England raised the base of interest to a 13-year high of 1% earlier this month in an attempt to stave off inflation and a cost of living spike.
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It’s a significant rise from December, when the rate was at a rock-bottom level of just 0.1%.
This means mortgage repayments have become more expensive for many households, but you might be able to cut costs by switching to a cheaper deal.
Martin warned that those on variable rates have about a month to shop around before their bills rise.
Meanwhile, homeowners with a tracker mortgages will already be feeling the effects of the interest rate hike.
Writing in the latest MSE newsletter, he said: “With further rate rises predicted, and many lenders’ default standard variable rates heading to 5%, checking if you can save by changing deal is a must-do.”
Rates for fixed-rate mortgage deals have been increasing over the past few months.
In October last year, there were more than 50 deals below 1% but the lowest rate is now 2.1%.
The consumer expert said that although families may not save as much as if they switched their deal a few months ago, they could still save thousands of pounds as the base rate is likely to rise further.
Analysts at Capital Economics expect the Bank of England to increase base rate to 1.25% by the end of 2022, and 2% in 2023.
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The interest rates on variable or tracker mortgages are linked to the Bank’s base rate, so when that goes up, so do your monthly repayments.
According to figures from AJ Bell, the latest rate of 1% will increase repayments on a typical £250,000 mortgage by £32 a month – £384 a year.
If you have a fixed rate mortgage deal, then you won’t be affected by rate hikes.
For those looking to switch their mortgage deals, Martin has explained how to do so.
How can I switch mortgage?
Check current deals at your existing lender
Often referred to as a ‘product transfer’, taking out a new mortgage with your existing lender tend to involve less paperwork and cost less.
It prevent you from going through the usual affordability checks on new customers and can also mean paying lower fees.
Compare with other deals on the market
Once you know what your lender’s best offer is, you should check other deals on the market and see if you can get a better one.
You can do so by checking comparison sites such as MoneySavingExpert’s Mortgage Best Buys comparison tool.
A mortgage broker can help, though many will charge a fee.
Use online calculators to see how much you can save
You can decide whether it’s worth switching by checking how much you can save with a new deal.
MoneySavingExpert can help you figure out the cost with its Mortgage Calculators.
Work on how you can be accepted
If you remortgage, a lender will carry out credit and affordability checks on you.
Martin said it’s important to stay on top of your credit files before the switch.
Here are nine ways to improve your credit score, including registering to vote and credit builder cards.
Meanwhile, we explain how you can get a mortgage if you’ve got a poor credit score.
Plus, a mortgage expert has revealed the tricks to get a loan as lenders make it harder to get approved.
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