More than 315,000 homeowners who took out fixed-rate mortgages at the end of 2003 and the start of 2004 could be heading for a shock when their special deals run out, research from online mortgage company mform.co.uk reveals. Analysis shows they could be facing monthly increases of as much as £140.
Average fixed-rate deals between November 2003 and March 2004 were 4.67 per cent hitting a low of 4.28 per cent in November 2003. But base rate changes since then have sent average fixed-rates up to around 5.26 per cent with the Bank of England raising rates by 0.5 per cent during 2006
Francis Ghiloni, marketing and business development director of mform.co.uk, said: “Borrowers who took fixed-rate deals in 2003 have done spectacularly well. But the market has changed radically since then and rates have moved substantially.
“People who picked up good deals three years ago proved they were 'rate smarts' and need to maintain that record by choosing wisely again.
“The Bank of England is gradually raising interest rates and that is having a major impact on the mortgage market. With thousands of mortgages and over 100 lenders to choose from borrowers have plenty of choice.
“There is no excuse for apathy and anyone tempted not to review their circumstances may pay a high price. However choosing a mortgage must be about more than simply picking the lowest initial interest rate. We urge borrowers to focus on the true cost of their mortgage by taking account of factors such as insurance, legal fees, application fees, product features and the ability to make over-payments.”
Analysis by mform.co.uk shows that a borrower taking out a £100,000 mortgage between November 2003 and March 2004 at the average 4.67 per cent fixed rate would have paid £571.86 a month on a repayment basis. If they switch to the current average fixed-rate deal of around 5.26 per cent their monthly payment will increase to £606.77 – an increase of £34.91 a month or £418.92 a year.
However if they do nothing and simply accept their lender’s standard variable rate of up to 7 per cent their monthly payment will rocket to £715.08 a month – an increase of £143.22 or £1,718.64 a year.
