I am telling you, Look at fixed rates if you have a variable rate mortgage !

I am now recommended those borrowers currently sitting on their lender’s Standard Variable Rate (SVR) to consider locking in to a fixed-rate deal.

The advice comes following the news that rates are on the rise for average fixed rate deals. John Charcol has also sounded a similar warning, as well as other leading mortgage advice firms.

Significant numbers of current borrowers will benefit over a three or five-year term if they opt to fix their mortgage payments now. I can only stress that the rates currently on offer will not be available when Bank Base Rate (BBR) starts to make its inevitably move upwards.

I can appreciate that some borrowers will feel pleased with their current mortgage arrangement particularly if they are on an SVR of between 2.5 to 3.5%. The question, ‘Why should I fix when it will mean increasing my monthly repayments?’ is often raised. I understand and sympathise that borrowers will want to pay as little as possible on a monthly basis. However, what might seem a ‘no brainer’ at present needs to be looked at in closer detail, preferably with a mortgage adviser.

All this market needs is for Bank Base Rate to begin inching up and lenders to act accordingly before any short-term gain turns to long-term pain. As can be seen by the latest Moneyfacts research, the rates for fixed-rate products are already on the rise and any movement in BBR will see this escalate greatly. When this does happen, borrowers will find that the attractive long-term fixed rates available now will no longer be an option.

Those who are contemplating remortgaging to a fixed rate should certainly consider their options right now rather than waiting. To hang on, even for a couple of months, could mean a further 30 to 40 basis points (that's 0.3 to 0.4%, or about £25 to £33.33 per month per £100,000 of mortgage loan) rise in pricing which over the course of the mortgage will add a significant amount to the overall payment.

I am fully aware that many borrowers will be feeling the benefits of significantly reduced payments at present, however, a mortgage is a long-term commitment and everyone should consider their repayments over a period much greater than the next few months.

To discuss your particular needs, please use the links to the side of this blog to contact me, or pick up the phone and dial 08458 386938.

Repayments soar at end of current fixed rate deals

Mortgage borrowers coming to the end of fixed rate mortgage deals this month could see their monthly repayments soar by more than £300, by my reckoning.

£30 billion of fixed rate mortgages are due to expire by the end of this month, and with lenders’ rates running at much higher percentage rates than previous years, many borrowers face a drastic increase in their monthly repayments.

On a typical two-year fixed rate mortgage signed in 2006 at a rate of 4.5%, repayments on the following loans would be £277.92 on a £50K loan; £555.83 on a £100K loan; and £1111.67 on a £200K loan. On a typical rate of 7.1% today, however, monthly repayments would increase to: £356.58 on the £50K loan; £713.17 on the £100K loan; and £1426.34 on the £200K loan.

Few people are actually aware that even a half or quarter per cent of an increase in interest rates can translate to £50 less in their pocket each month, so for the rate to jump up by 2% or 3% overnight could come as a big shock. The rates I’ve quoted are fairly typical of the current market, and whilst they represent a rise of 2.6%, this equates to a 65% increase in the interest payments.

If you are concerned about the above situation, as ever, I am able to lead you through the mortgage maze. Just use the links to the right hand side to make contact with me.

Long-term fixed rates risky, stupid and dangerous.

Mr Darling, The Chancellor of the Exchequer, gave his first Budget yesterday. There was not a lot in it for home-owners in particular, with no reduction in Stamp Duty for first time buyers, or otherwise. However he did state that he would like mortgage lenders to offer Long-term fixed rate mortgages.

I believe he is living in cloud cuckoo-land, as long term fixed rate mortgages will never catch on. He fails to understand that people will not commit to a long term deal which could potentially harm them in the short, medium and long term. Long term deals are potentially risky for borrowers who could be stuck in expensive deals when interest rates are falling or have to pay high redemption penalties to move house.

Currently, there are just six (out of 90) lenders who offer fixed rates for 25 years or more despite the Chancellor of the Exchequers repeated call for more long-term deals to be offered.

Mr Darling launched a Treasury consultation on long-term fixed rate mortgages which will report back in the autumn. Iin his Budget speech he said “more people should have the chance” to take out long-term fixed deals." Cloud cuckoo land is just being delayed.

Figures show lenders with 25-year deals direct to the public include Norwich & Peterborough,, Kent Reliance, Nationwide, Co-Operative Bank, Cheshire and Manchester which also offers a 30-year deal. Homebuyers in the Chancellor’s own Edinburgh constituency can only choose from four lenders as Kent Reliance and Norwich & Peterborough do not offer loans in Scotland.

I say "Certainty about monthly mortgage payments may be a good thing but borrowers should think very carefully before committing to 25-year fixed rates or any product longer than 5 years. Take Independent Mortgage Advice. The risks are clear. Not only could borrowers end up locked at a higher rate when interest rates are falling but could also find themselves having to pay redemption penalties if they want to move house. Remember that the average person stays in a house for under 7 years. It is virtually certain that people’s circumstances will change several times over a 25-year period. It will be interesting to see what comes out of the Treasury review as all the evidence so far is that the mortgage industry does not appear to share Mr Darling's ambition for such long-term fixed-rate deals. Analysis shows rates on 25-year fixed deals available direct to the public currently range from 5.5% to 6.58%. Best rates for two-year deals range from 4.75% to 5.50%. Who would commit to a higher than necessary deal than they need to. Market forces will dictate what products are avaliable to borrowers.

A suggestion to the Chancellor : As you now own Northern Rock bank, why not force them to only offer long term fixed products? Use the 'People's Bank' to see if the people take up such products. After all, if you believe long-term fixed rates are so good, your 'People's Bank' will attract so many customers that it's return to private ownership will be assured, relieving you of the burden that nationalisation of Northern Rock has cost the tax-paying public (who are also borrowers).

Mr Darling, enjoy your time in the limelight whilst you can. You will be voted out at the next General Election if you carry on with such nonsense as you delivered yesterday."