MILLIONS of homeowners are being warned that bills will rise by hundreds.
The average two year fixed mortgage rate has reached its highest rate in nearly ten years.
1
Research conducted by the comparison site MoneyFacts said that the average two-year fixed mortgage rate is now higher than 4%.
This equates to a £278 bill rise for those with a 75% loan to value mortgage living in a property worth the average price of £283,000.
Eleanor Williams, finance expert at Moneyfacts.co.uk said: “This is the first time that this rate has breached 4% since February 2013 (4.09%).”
The news comes only weeks after the Bank of England hiked the base rate by 0.5% from 1.25% to 1.75%.
This marked the biggest increase to interest rates since 1995.
It came as rocketing energy bills are set to reach £3,553 a year in October, with some analysts predicting they will even top £5,341 next April.
Those on standard variable and tracker mortgages are expected to see bills rise by £888 this year since the hike to the base rate.
These mortgages are linked to the Bank’s base rate – so when it goes up, so do your monthly repayments.
Most read in Money
Around 75% of mortgage holders are on a fixed rate deal and weren’t immediately affected by the base rate hike.
But those looking to take out a new fixed rate mortgage have lost out on cheaper deals.
However, if analysts are correct in their prediction of future base rate rises, locking in a fix now could save you hundreds in the long-term.
What should I do if I’m on a standard variable rate mortgage?
Locking into a fixed rate deal now will give you certainty over your repayments for a set period of time and protect you from future base rate hikes.
If you are thinking about getting a mortgage, you should always shop around to see how prices differ.
Price comparison sites like Compare the Market can help you find out how much lenders are willing to give you.
Ashton Berkhauer, mortgage expert at MoneySuperMarket.com, said: “If you’re on a standard variable rate mortgage, use a comparison tool to check how much you could save with a fixed rate mortgage.”
What should I do if my fix is due to expire?
If you have six months left on your mortgage on a fixed rate, and don’t want to pay an early repayment charge, switch to a new deal.
Personal finance expert and founder of MoneyComms.co.uk Andrew Hagger, said: “I’d recommend that mortgage borrowers contact their existing lender first to understand what options are available.
“If you’re within 6 months of your current fix ending you may be able to start the ball rolling now to renew your deal.”
Ashton said: “If your fixed rate is coming up for renewal, you can usually lock in a new deal up to six months in advance with a new lender, or three months with your existing lender.”
What should I do if I still have more than six months left?
If you want to leave your mortgage deal before it ends, you’ll usually have to pay a fee.
So-called early repayment charges are typically a percentage of the total amount you owe on your mortgage, so can easily cost tens of thousands of pounds
Andrew said: “If you’re in the middle of a fix it’s worth weighing up the cost to exit early and lock in to a new deal as it looks likely that rates will continue to rise through to the end of 2022 at least.”
One family previously spoke to The Sun after using a new calculator to work out how they could save more in the long run by getting a better mortgage deal now.
