mform estimated that customers will see their mortgage repayments increase by around £1,021 a year, if they move on to their lender’s standard variable rate (SVR).
In 2005, around 1.3 million fixed rate mortgages had been taken out on top of the 977,000 in 2004. The majority of these would have been for two and three year fixes with the market average rates for this type of mortgage being 5.18% in 2005 and 5.30% in 2004.
The average in February 2007 had increased to 5.34% and the average SVR was 6.12%, mform.co.uk says that with further rises being predicted in the Bank of England Base Rate, the average fixed rate and SVR are set to increase dramatically.
Francis Ghiloni, mform.co.uk marketing and business development director, said: “With further increases in the Bank of England Base Rate being predicted, people coming to the end of fixed rate deals need to act now or see their mortgage interest rates increase dramatically. For those who took out a fixed rate deal in 2005 which is coming to an end, they could see their repayments increase by £1,021 if they move on to their lender’s SVR.”
As many mortgage holders fear further increases in the Bank of England Base Rate, mform.co.uk has seen a 60 per cent increase in the number of visits to its site over the past month, when compared to January this year. Around 87 per cent of applicants have been applying for a fixed rate deal. However, mform.co.uk warns that those looking to take out a new fixed rate deal need to act quickly as some lenders are removing or repricing their offers.
Ghiloni said: “Some lenders have pulled some or all of their fixed rate deals or placed them on ‘withdrawal watch’, which means that they could be pulled at any moment. Customers whose deals are running out should research the market now because there will be fewer offers available when their deal expires. Lenders generally allow a borrower around three months to take up a deal and once an offer is made it is unusual for it to be withdrawn. However customers will normally need to pay a fee which may not be refunded if they don’t proceed
"While fixed rates are taking the bulk of the market at the moment there are still strong deals on variable rates such as ING Direct’s standard variable rate of 5.39 per cent. Applicants may also want to look at shorter-term fixes such as one-year deals if, as some experts predict, interest rates will peak this year and come down next year.
"However anyone taking out a one-year fixed rate needs to look carefully at the fees involved in changing deals and focus on the true cost of the mortgage."
