Homeowners must ‘act now’ to fix mortgage rate as millions see repayments rise

Hospitality: Interest rates to rise further to match inflation

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Although it’s good news for savers who might now see more attractive options come onto the market, it’s not so good for borrowers. With many experts claiming it could be the first rise of many, Britons are being urged to take action.

In real terms it means that a homeowner on a 3.5 percent Standard Variable Rate, will see their payments on a 25-year £200,000 mortgage rise by £180 a year.

On top of this, the Bank of England has hinted that this could be the first rate rise of several, something which is echoed by experts in the sector.

Martijn van der Heijden, chief financial officer at Habito, said: “This base rate hike could be one of many going into 2022.

“A rising base rate environment is something many homeowners have never experienced; anyone who’s bought a home in the last 12 years has only ever had a mortgage during a time when base rates were one percent or below.

“Santander, Nationwide and Natwest – put through price increases yesterday, after the Bank of England announcement. So we’re seeing a bumping-up of rates for both purchases and remortgages.”

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Campaigners are worried that this will cause misery for thousands of mortgage prisoners who can’t move deals because their circumstances have changed.

Mortgage prisoners are homeowners stuck on pricey mortgage deals, unable to switch to cheaper ones mainly because they no longer meet affordability tests.

A spokesperson said: “A rate increase will ultimately push more repossessions and cause more families to suffer in poverty.

“Mortgage prisoners will be most affected, and they are the ones who have been treated so unfairly for so long.”

The action group has been eagerly awaiting the Financial Conduct Authority Mortgage Prisoner Review, but has been disappointed with the results.

The spokesperson added: “This review has highlighted that the FCA, treasury and UK finance have failed UK borrowers.”

Campaigners say that out of the 47,000 mortgage prisoners who have already received help through the FCAs modified affordability rules introduced in 2019, only 200 have remortgaged.

Another 118,000 mortgage prisoners remain vulnerable, because the FCA has changed the definition of a mortgage prisoner.

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Yesterday, the nation’s favourite financial guru, Martin Lewis said: “While the rise itself isn’t huge, the signal is.

“By increasing interest rates, the theory says you encourage saving and discourage borrowing, taking cash out of the economy, and slowing things down.

“For variable rate mortgage holders, the typical £8 per month rise per £100,000 of mortgage, will be far from welcome amidst the other huge price rises we’re seeing in energy bills and fuel.

“So it’s important, especially for those on the standard variable rates (SVR), where lenders have the freedom to increase rates by more than the 0.15 percent – to see this as a spur to check if you can save by getting a better mortgage deal.”

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