Check fixed rate deals to avoid extra payment shock, say experts
March 5, 2016 by Brendan
Borrowers
A number of experts have issued warnings to borrowers who have a fixed rate deal to check when it will come to an end, so that they avoid paying extra for their mortgage.
Thousands of people who took out a fixed rate deal two years ago may face shock payments if they let the deal expire and default to the lender’s Standard Variable Rate. Monthly payments may escalate by £100 a month, until borrowers have secured a new deal.
A study conducted by Moneyfacts, shows that a borrower who had equity of 25% in their property two years ago, will have secured a fixed rate deal at an average of 3.06%. However, if this deal expires and the borrower returns to the standard variable rate, they could find themselves facing interest rates of 4.82%, while some lenders may charge as much as 6%. On a typical repayment mortgage of £110,000, moving from the average fixed rate deal to the average SVR, a borrower could find monthly payments increasing by £110 each month.
A mortgage adviser who has taken a CeMAP course will have the necessary skills and knowledge to help borrowers find a suitable deal before their current fixed rate product comes to an end.
According to Charlotte Nelson, Moneyfacts’ senior researcher, there are several good fixed rate deals available currently, due to the fierce competition between lenders. Nelson advises borrowers to start looking at alternative deals two or three months before the end of their existing deal, to find an affordable product.
Written by
Brendan
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