Mortgage warning: Hundreds of thousands face paying £2,000 more each year very soon

There are a whole host of mortgage options, and this includes variable and fixed rates. The type a person goes to comes down to their own personal circumstances and financial situation, however once a fixed-rate finishes, many will be automatically rolled onto their lender’s Standard Variable Rate.

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Regardless of what interest rates are doing in the wider market, a fixed-rate mortgage will mean repayments will be the same for a certain period of time, as the Money Advice Service explains.

“If you have a variable rate mortgage, the rate you pay could move up or down, in line with the Bank of England base rate,” the website adds.

According to new research by Comparethemarket.com, 10 percent of home-owners on fixed rate mortgages will see their deals come to an end in the next six months.

This works out at 850,000 households which could be set to see their monthly payments rise, should they roll onto their lender’s Standard Variable Rate (SVR).

The price comparison giant has found that these households could see their monthly payments rise by up to £175 should they allow their mortgages to slip onto the SVR.

According to Comparethemarket.com, it means these homeowners could end up paying around £2,000 extra in interest each year.

Miles Robinson, Head of Mortgages at online mortgage broker Trussle, commented: “Lapsing onto your lender’s Standard Variable Rate (SVR) could significantly  increase your monthly outgoings.

“If you’re about to fall onto the SVR, it’s time to consider switching to a new deal.

“Alarmingly, for the average borrower, the difference between a market-leading deal and the average SVR is around £4,500 in extra interest each year.

“To find out when your initial period is due to end, look at a copy of your original mortgage offer or call up your lender to find out.

“You should review your mortgage three to six months before the end of your initial period to give yourself enough time to find and switch to a new deal.

“With interest rates at an all-time low it may be possible to secure these ahead of time so we are urging those looking to remortgage, to start the process as soon as possible so they don’t pay more than they have to for any period of time.”

Meanwhile, Mark Gordon, Director of Money at Comparethemarket.com, said of the current mortgage market: “Before the coronavirus pandemic, the latest [Bank of England] data suggested how strong the property and mortgage markets were, with mortgage approvals at a six-year high.

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“Within the space of a few weeks, this stance has completely changed.

“With in-person valuations and property viewings unable to take place, we have seen some lenders stop offering products to new customers looking for higher loan to value deals, so that they can focus on supporting their existing customer base and organise mortgage payment holidays.

“The government also took the unprecedented decision to stop all house purchase transactions, in effect, freezing the market.

“The uncertainty of Brexit lingered over the housing market for years. However, we’re confident that once this crisis is over we will see, hopefully, a quicker bounce back.

“While it is going to be a tough and bumpy road to get there, we must remember the foundations of the market remain strong.

“While remortgaging isn’t at the forefront of people’s minds, understandably, for those coming to the end of their fixed rate mortgage deal, it could be worthwhile looking around online to see what deals are still on offer and whether you could pay less.

“Those on tracker mortgages, for example, are benefiting from the latest Bank of England base rate cut to 0.1 percent – a record low in its 325 year history – with certain lenders now passing these savings on to customers.”

Homeowners can find out how much they could potentially save by remortgaging online, using an online calculator.

This week, Trussle has shared its current best-buys for mortgage deals, accurate as of June 9, 2020.

Remortgages (two-year fixed)

Remortgages (five-year fixed)

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