Are you ready for your new mortgage rate?
Two years ago many borrowers went for tempting cheap two-year fixed rates, as a new government scheme meant that lenders were able to offer mortgages at all-time low rates.
As many of these deals come to an end in the next few weeks, those borrowers will revert to their lender’s standard variable rates, which are usually significantly higher.
According to reserch from financial information provider Moneyfacts, borrowers could potentially see their mortgage repayments shoot up by nearly £3,500 a year.
Do the maths
For example, two years ago Post Office Money offered a two-year fixed rate at 1.63%, which reverts to its standard variable rate at the end of this month, which is currently 4.49%. On a typical £200,000 repayment mortgage over 25 years, this would mean that monhtly repayments would jump from £815 to £1,110 – an annual increase of £3,580.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “Borrowers may be shocked by the jump in cost of their monthly repayments when their fixed rate deal ends, particularly if they took advantage of one of the plethora of low rates available in 2013. The difference between the initial rate on the deal and the revert rate can be quite dramatic.
“However, borrowers don’t have to put up with these high costs; mortgage rates are still resting at record lows, which means there has never been a better time to remortgage to a new fixed rate. Not only will borrowers secure themselves a cheaper deal, but they will also buffer themselves from any base rate rises within the deal.”