Martin Lewis has explained how much homeowners can expect to their mortgage to go up by if interest rates keep rising.
Interest rates have been steadily rising over the last few months and are currently at 2.25% after the Bank of England hiked its base rate for the seventh time in a row in quick succession.
Major banks and lenders have started pulling mortgage deals from sale this week after the value of the pound plummeted in the wake of the mini-budget announcement.
Virgin Money, Halifax and Skipton Building Society have all withdrawn mortgage products. It means there is now less choice for mortgage switches, while others have been replaced with more expensive deals.
Rising interest rates affect anyone on a tracked mortgage and usually people on standard variable rate (SVR) deals. Tracker mortgage monthly repayments move in line with the base rate, which means anyone on that payment system will end up paying more for their mortgage.
Most standard variable rate (SVR) deals will also become more expensive, although it is down to lenders to decide whether they put up rates. People on a fixed-rate mortgage are protected from any rises until their current deal comes to an end. Some homeowners could face paying thousands of pounds more when they come to remortgage due to how much rates are rising.
What has Martin Lewis said?
In the latest MoneySavingExpert newsletter, Mr Lewis explained how the interest rate hike could affect monthly mortgage repayments.
He said: “For each 1 percentage point your mortgage rate increases, expect to pay roughly £50 more a month (£600/year) per £100,000 of mortgage debt.”
The Money Saving Expert founder warned that rising rates “will likely push millions renewing when their fixes end into ‘can’t pay my mortgage’ territory”.
Anyone on a tracker or SVR mortgage, who knows their new mortgage rate following the base rate rise, is avised to check if they can save money by switching to another deal. Meanwhile, those on a fixed-rate deal that is coming to an end should also be actively looking for a new deal.
Some lenders let homeowners lock in a rate six months in advance and many others allow you to lock in three months ahead.
Mr Lewis added: “If your fix ends before March 2023, check deals now, as rates are likely to rise further, and today’s rates may soon disappear,”
If your fixed-rate deal is not ending soon, then you will need to factor in any early exit penalty fees too to work out if you will be better off overall.