Martin Lewis offers advice on mortgage overpayments
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Some 850,000 mortgage holders are set to be detrimentally affected by the Bank of England’s likely move over interest rates tomorrow (May 4). Experts believe the financial institution is set to raise the base rate from 0.75 percent to one percent in a bid to defeat inflation. However, as a consequence of this, many mortgage holders are forecast to see their mortgage repayments rise.
This will put further pressure on households on top of inflation hitting seven percent and the increase to the energy price cap.
Martijn van der Heijden, the chief financial officer at Habito, explained: “At the moment, all signs are pointing to another rate rise on Thursday.
“UK inflation was at seven per cent in March – the highest level since 1992, but this was before April’s 54 percent hike in Ofgem’s energy price cap is included in calculations.
“Inflation is likely to be higher now, and this will put yet more pressure on the Bank of England to act again.”
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Recently, homeowners and buyers have rushed to secure their lower rates while they continue to last.
Over the last couple of months, since the Bank of England has continued to hike interest rates, lenders have passed on the higher costs to borrowers quickly.
On how this will affect homeowners, the mortgage expert is sounding the alarm that many should expect their repayment rates to increase.
He added: “For the quarter of UK homeowners who are on a variable, tracker, or standard variable rate, any vote to rise the base rate will mean they see their repayments go up; on tracker mortgages the change will be immediate and certain, but on a variable rate, it’s up to the lender.
“If you’ve not remortgaged for a while and have slipped on to your lender’s standard variable rate – it’s very likely you’ll now be paying more.”
According to research carried out by Moneyfacts, the average Standard Variable Rate (SVR) mortgage rose by 0.10 percent to 4.71 percent in April.
Discussing when the pending rate hike will affect homeowners, Habito’s mortgage expert said: “The better news for 74 per cent of UK homeowners who are on a fixed rate deal is that today’s base rate rise won’t lead to an immediate financial hit.
“That said, if the Bank does need to raise rates again – and financial markets believe this could happen over the summer – when you do come to remortgage, we could see mortgage prices higher than where they are now.
“For remortgagers, we know this year is going to continue to be exceptionally busy for remortgaging; data firm CACI estimates that £328 billion worth of deals are up for renewal, a post-financial crisis record.
“Bank of England data this week showed that approvals for remortgaging rose to 48,800 in March, the highest since February 2020.”
Ahead of tomorrow’s likely interest rate increase, Mr van der Heijden encouraged mortgage holders to review their options.
He added: “For homeowners with mortgage deals expiring in the next six months, it’s the ideal time to look at whether fixing their mortgage costs is the right course of action.
“Some lenders allow you to lock in a deal six months early. If you’ve got a mortgage offer, your lender will typically honour the rate that they’ve offered you.
“Mortgage rates have been rising over the past few months and the cheapest deals on the market are being withdrawn by lenders at short notice.
“Any inconsistency in your documents or delay in considering a mortgage recommendation could see you miss out on the most competitive rates recommended by your broker.
“If you haven’t got a mortgage offer secured yet, we’d recommend getting your documents in order, checking your ID is up to date, and your address is correct on your bank statements so that you can avoid these common pitfalls when it’s time to submit your mortgage application.”
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