Mortgage shock warning for 1.8million borrowers as rates creep up and market turmoil continues
MILLIONS of homeowners could face higher mortgage costs this year as rates continue to creep up.
Virgin Money hiked the cost of several of its fixed-rate mortgages this week, while Santander warned it may need to “nudge up” prices in the short-term.
Rising government borrowing costs and uncertainty about the UK economy have pushed banks to increase their rates slightly.
More than 1.8million borrowers with fixed-rate deals need to remortgage this year, according to trade body UK Finance.
Here, Adele Cooke explains what you can do to keep repayments down.
What should I do if my mortgage deal is ending?
If it is ending in the next few months, don’t panic.
Some lenders will let you lock in a new rate six months before your current one ends.
Applying for a new deal now could give you peace of mind and let you know how much you will pay.
You can always swap to a better offer if interest rates go down before your existing deal expires.
David Hollingworth, director at L&C Mortgages, said: “It’s important to review your rate in good time so that you have time to arrange something and can switch smoothly.
“Taking advice will help you keep track of the best overall value, factoring in not only the rate but also the fees that can mount up.”
Should I lock into a new fixed deal or choose a standard variable?
If you are due to remortgage but do not want to lock into a fixed deal yet, the worst thing you can do is roll on to your lender’s standard variable rate (SVR).
SVRs often have much higher interest rates than fixed deals. This could mean that even if interest rates fall in a couple of months, the SVR rate will eat into any savings you make.
A typical SVR currently has an interest rate of 7.81 per cent, compared to an average five-year fix at 5.25 per cent, according to rate analyst Moneyfacts compare.co.uk.
You could be better off with what’s known as a tracker mortgage instead.
These fluctuate in line with the Bank of England base rate and are often much cheaper than an SVR deal.
A typical two-year tracker has an interest rate of 5.47 per cent.
Andrew Montlake, of mortgage broker Coreco, said a tracker can be a “smart choice”. He added: “They are good for those who believe we’re at or near the peak of interest rates and want to build in some flexibility.
“If you’ve got a little bit of breathing room in your budget — and you want to take a punt on rates easing — then trackers can work. If not, then you may prefer the stability of a fixed deal.”
Should I overpay my mortgage before my rate rises?
You could benefit from overpaying if you have some spare cash.
Doing this helps you chip away at your debt faster, meaning you will accrue less interest on your loan long-term.
Overpaying a lump sum can reduce your monthly repayments going forward, as you will have a smaller loan to repay in the end.
It can be a good option if you are on a low fixed deal and will remortgage to a higher rate.
You can typically overpay your mortgage by up to ten per cent before you are hit with a fee.
Make sure you have enough savings to pay for emergencies such as your car or dishwasher breaking down first, though.
What should I do if I’m just about to buy a house?
If you are buying a house then you will need to consider any mortgage rate increases in your affordability calculations.
If the cost of borrowing has risen, then banks may not be willing to lend you as much cash.
Your lender will also assess whether or not you can afford to keep up with your mortgage payments if your interest rate increases again.
This could mean it may not let you borrow as much money as before.
Speak to your lender if you are concerned.
I’m a first-time buyer. What can I do?
House prices have eased in some areas and schemes including low-deposit mortgages mean now could be a good window of opportunity for first-time buyers.
Andrew Montlake suggests it is an “exciting yet daunting time” for those getting on the property ladder.
You may feel under pressure to buy before stamp duty rates for first-time buyers change in the spring.
At present, first-time buyers pay no stamp duty on properties under £425,000.
They pay a rate of five per cent on properties which cost between £425,000 and £625,000.
But, from April 1, first-time buyers will only pay zero stamp duty on properties under £300,000.
And from £300,00 to £500,000, they will be have to pay five per cent.
Some lenders do, however, have schemes that could still help you get on the ladder.
Yorkshire Building Society will let you borrow up to 99 per cent of a home’s value with a deposit of £5,000 or more.
Meanwhile, Lloyds, Nationwide and Halifax will lend to you if you have five per cent of the property’s value.
Mr Montlake recommends: “Start by sorting out your budget and getting a good handle on what you can afford.
“Speak to a professional broker who can look at the best deals across the whole market, including schemes or low-deposit mortgages.”
OFCOM TO CUT ROW DELAY?
MOBILE and broadband customers could get compensation sooner if things go wrong due to a huge rule change.
Currently, anyone who complains to a telecom provider and is unhappy with their response can escalate their case to an ombudsman.
Firms then have eight weeks to resolve the dispute.
But this timeframe could be reduced to six weeks under new proposals put forward by regulator Ofcom.
It would mean frustrated customers could be in line for compensation earlier if their provider is found to be in the wrong.
The regulator is consulting on this proposal until March 12 and a decision will be reached by the end of the summer.
It said any changes would come into effect six months later.
Ofcom said it was consulting on the change as it believes households are not currently getting “sufficiently prompt access”.
Martin Lewis welcomed the proposals on X, saying: “Pleased to hear Ofcom is consulting on reducing the time it takes to escalate issues to an ombudsman from eight to six weeks.”
Before going to the ombuds-man, you must complain directly to the firm involved.
If it does not resolve your issue after eight weeks, or if you receive a “deadlock letter” saying it can’t resolve it, you can then escalate it to the Communications Ombudsman.
You can raise a dispute by calling 0330 440 1614 or by emailing enquiry@commsombudsman.org.
- By Sam Walker
MAT-STRESS OVER DELIVERY
POPULAR mattress brand Emma Sleep is facing fury from customers over missing orders and long delivery delays.
Over the past few months, the retailer has been swamped with negative reviews complaining of undelivered £500 mattresses, unpaid refunds and generally poor customer service.
Of almost 50,000 reviews for it on Trustpilot, nearly a quarter are just one star.
Consumer disputes expert Scott Dixon, of The Complaints Resolver, said Emma has been “plagued by issues” for months.
He added: “It’s also virtually impossible to resolve any complaints and queries, with Emma having no meaningful customer support service.”
When The Sun contacted Emma for an explanation, the company revealed it is facing supply issues and problems with its customer services operations after moving to a new warehouse a few months ago.
A spokesperson said: “Unfortunately, this transition coincided with a surge in demand for our products, leading to delays for some customers.
“Emma would like to sincerely apologise to customers who have been experiencing longer than usual delivery times.”
Customers who don’t receive their mattress and paid by card could raise a chargeback within 20 days of their purchase.
Mr Dixon said: “Stress there has been a breach of contract under the Consumer Rights Act 2015 to your bank or card provider.”