Money Mail mortgage story

“The days of sub-1% deals are over. For good. Finito. Along with others, I have been shouting from the rooftops for the past 12 months that people needed to be remortgaging now to lock in historically low deals. Some listened and sadly a great many didn't. It's almost certain the Bank of England will need to raise the base rate again in March with inflation still raging through the system, which will inevitably have a knock-on effect on mortgage rates. If I were coming to the end of a deal within the next six months I'd be calling a broker with a fantastic beard to get it sorted now.”

“Most agree that rates are now only going one way and that further increases in the Bank of England base rate are likely over the coming months. More and more borrowers are attracted to longer term fixed deals and are not just concentrating on the lowest possible monthly payment now. Those with a year or two left on their fixed rate will be worried to see what awaits them when it is time to fix again.”

“The days of mortgage rates below 1% are over. Those who fixed on less than 1% in 2021 should expect their mortgage rate to increase when they look to renew. We have seen a lot more interest in rates that are fixed for five years. There still appears to be a lack of interest at 10 year fixed, as these rates tend to be much higher than the 5 year options.”

“Interest rates are rising but let's put this into perspective. After the economic meltdown of 2008, interest rates dropped off a cliff and have remained at less than 1% for over a decade. But looking at the bigger picture, for the 15 years from 1993 to 2008 rates averaged somewhere around 5%. For the 25 years before that, so going back to the 1970's, rates averaged around 10%, and even went above 15%. We won't be hitting these levels again anytime soon.” We have had an unprecedented period of all time low interest rates. The problem is we've got used to it. Those with highly leveraged debt burdens will be the first to feel the pain.

“The golden era of rock-bottom mortgage rates is fast disappearing in the rear-view mirror. Mortgage deals are only going to get more expensive over the next year or two. I think it depends how deeply entrenched inflation becomes as to where rates end up. But all the signs point to inflation not being the transitory blip the economic experts have led us to believe. Hence the Bank of England Governor's plea for employees to avoid asking for large pay hikes. We're finding borrowers who aren't looking to move any time soon are locking in on a longer fixed rate period. Five or seven years is common. Ten years is becoming increasingly popular too.”

“A base rate of 2% is still historically very low. We have just become accustomed to seeing rates less than 1% and now any figure above that looks high. Competition in the mortgage market is still high, which helps to keep the rates we pay in check and whilst we have seen increases they remain pretty small in reality. It's certainly not driven new buyers to look at longer term (10 year +) fixed rates anymore than previously. Those that were lucky enough to secure a fixed rate at the historic low rates we saw last year do have to be aware of what lenders call "payment shock", which is when rates rise whilst you are insulated on your fixed rate and exit that deal into a much higher interest rate market. All you can do is be aware that you are on a very, very good deal and ensure you budget with a reserve to allow for an increase in mortgage payments in two, three, or five years time when your deal ends.”

“We have probably seen the last of mid-term fixed rates offered at sub 1%. Those that were able to take advantage of the extremely low fixed rates have probably another four years to prepare for the interest rate environment they will return to. It could well look like a large increase in payments when they do re-enter the fray. However, there are a great many whose rates will be coming to an end before then and who have enjoyed very low rates possibly for as long as they have been mortgage borrowers. Lenders stress test mortgage payments as a matter of course at a notional rate of interest much higher than the rate set for the borrower – this is to allow for interest rate rises, but that is of little consequence if you are looking down the barrel at a steep increase in your monthly cost of living. Breaking a fixed rate contract can be expensive and there is no guarantee that remortgaging and paying early settlement charges to secure a new rate over a longer term will prove to be a good bet. It is a consideration to be made with caution and I would not want to be the one betting on future savings. 10-year fixed rates have been available for some time but are not popular. Ten years is seen as a long commitment and for many it is too long a contract to enter into because the costs to exit can be high. Moving home, changing employment, relocating, growing family, shrinking family, lifestyle changes, divorce, marriage, health are all events that can instigate a review of finances and many of these may be over the horizon for many of us. The pricing of these longer term rates can also be a deterrent because they look more costly today, so, a borrower is gambling that it will work out to their advantage over the longer term. For those that are on fixed rates, they need not panic but they do need to plan. If they don’t have a relationship with an independent mortgage adviser they would be good to start one. Whilst mortgage advisers don’t have crystal balls or read tea leaves, they can offer guidance on steps that people can take to get themselves money fit and prepared for when their rate comes to an end and possibly identity opportunities that may arise ahead of the end of their deal. For anyone on a variable rate it is time to pick up the phone and start a conversation as rates are expected to rise and they will be the first impacted.”

Borrowers should be thinking 'I need to look at my options' Sometimes even with an Early Repayment Charge it can be cost effective to switch to a new rate now, even with a couple years left on an existing deal to beat the huge rate increase that is undoubtedly coming. A client on a great rate of 1.79% and a year left on his mortgage came to me this week wiling to repay the £700 ERC to secure a new fixed rate deal for as long as possible as he is concerned what the rates will look like this time next year. We have secured a deal at 1.89% for the next five years to take him to the end of his mortgage term. Locking in a new low rate longer term mortgage deal now provides peace of mind, security and stability. Why worry about the uncertainty. REVIEW YOUR MORTGAGE TODAY. It costs nothing to review this and could save you lots in the future!

As someone that had a nearly 7% mortgage on my first home, the last few years have been fantastic. As the rates increase across the board, I do think that the first time buyers may get more support via smaller increases in that bracket. I am still speaking to people on standard variable rate (SVR) and they have not thought about getting a new deal, until you discuss the potential savings that can be made. Most people will listen if you can come up with a way to save them money or save them time. So whilst the rates are increasing, they are not yet near the level when I bought my first home 14 years ago, so still a decent option. Are longer term fixes a good idea? They can be, it all depends on your current circumstances and what you are planning for. I would definitely discuss it with a mortgage broker, look at the structing, costs and exit strategy just in case. They last thing you need is a hefty early repayment charge (ERC) that you haven't factored in.