It has estimated that almost 350,000 people who took out two year fixed rate mortgages in 2003 are facing an increased monthly mortgage bill of £52.53 million as the fixed rate period of their loan comes to an end. On a typical £100,000 capital and interest repayment 25 year loan, the interest rate on their loans is increasing from an average fixed rate of 4.23%3 to the current Standard Variable Rate of 6.75%. This means that monthly repayments increase by £152 or 27% from £547 to £699, and represents a total cost for all 346,000 people of £52.53 million per month.
Mortgage Advice Bureau actively contacts all of its customers when a fixed or benefit loan period ends, to reappraise their needs and advise on their mortgage options. However, many other people may not realise that their fixed rate has finished until they become aware of an increased direct debit from their bank account.
Brian Murphy, Lending Manager at Mortgage Advice Bureau comments: “While homebuyers who took out fixed rate mortgages in 2003 benefited from the lowest interest rates in more than a generation, the increase in monthly cost as their fixed rate reverts to the SVR is severe. Although a Mortgage Illustration at the time the loan was taken out may have demonstrated the effect of a 1% increase in rates, many clients will be shocked at the automatic increase that they will have to pay.
“Our advice to mortgage customers is to always monitor their mortgage payments carefully, and seek independent mortgage advice to research the options available to them from the entire market. Independent advice will enable their current circumstances and needs to be taken into account, and the best deal sought from across the marketplace.”
Mortgage Advice Bureau advises that three current options for customers seeking to remortgage now that offer up to £100 per month savings on the SVR repayment rate are:
- 2 year fixed rates at 4.69% (with fees): repayments are £599 per month
- 2 year fixed rates at 4.89% (fee free): repayments are £604 per month
- Tracker mortgages at 4.80%: repayments are £606 per month
