It’s not surprising many homeowners are concerned about the future affordability of their mortgage. We haven’t seen interest rates this high for many years, in fact, not this century! Did you know there may be a way we can help you avoid a mortgage rate increase at the end of your current fixed rate?
What’s happening with mortgage rates?
The forecast is for the base mortgage rate to go to 5.5% before the end of this year, meaning we could see 2-year mortgage rates starting from 6.5%1, up from an average of 2.34% in December 20212, and 1.76% in December 20203 during the stamp duty holiday due to COVID.
Over the last few months, we have seen a rise in the unusual position whereby some borrowers are discussing moving from a low-interest mortgage rate arrangement to a far higher fixed deal. They would rather pay a hefty early redemption charge than take a chance they will not be able to afford the prevailing rate at the end of their current mortgage deal. Previously unthinkable and certainly not a usual state of affairs!
Understandably, the rise in mortgage rates will strike fear into those coming to the end of a current fixed rate, especially if only a few months off. So, why sit and watch the rates rise when you could do something about it?
How to avoid a mortgage rate increase
In short, you need to act to lock in a better mortgage rate. If your deal ends within the next 6 months you may be able to avoid the dreaded early redemption charges. At the end of any mortgage deal, you always have the option to remain with the current lender or to find a new offer if there is a more attractive rate elsewhere.
What has changed is the length of time before your current deal ends that you have to secure the next one. Many lenders now offer internal product transfers for existing customers up to 150 days in advance of your current deal ending.
Don’t worry, your adviser may be able to re-mortgage you with a new lender and secure a rate up to 6 months in advance of your current deal ending.
Once your adviser submits your mortgage in full, paying any fees in advance, or if you agree for them to be added to the loan, the mortgage is secure at the agreed rate. In the meantime, if the lender increases their mortgage rate, your mortgage is protected from the hike. It is then up to you to set a date for the new mortgage to start within the time the offer is valid. Always double-check this carefully.
How we can help
Legal & Medical are whole of market advisers and are fully independent; this means we have access to all lenders, so we are not tied to using just a few. We can give you advice on all mortgages available.
Our NHS medical and dental speciality means we understand the unique way that you are remunerated, and how your careers will progress. We also have long-standing relationships with lenders who also understand the medical profession.
Again, because of our independence and understanding of your career, we can also assist with the important issue of protecting your mortgage against death, critical illness and ill health after comparing all providers and finding the most suitable and cost-effective options for you.
We know this is a worrying time for anyone already with a mortgage or hoping to take on one soon, so why not allow us to use our long-standing experience and speciality to show you the best options and guide you through this current turmoil?
Did you know you could secure a new mortgage deal within 6 months of yours ending? Let us know by leaving a comment below.
Always remember your home may be repossessed if you do not keep up repayments on your mortgage.