More than £100bn worth of fixed rate mortgages are set to come to an end this year, pushing up their mortgage repayment costs.
That is according to online mortgage firm mform.co.uk, which says people on fixed rate deals could see an annual increase of £1,021 if they then move on to their lender’s standard variable rate (SVR).
Mform calculates that, in 2005, around 1.3 million fixed rate mortgages had been taken out on top of the 977,000 in 2004. It says 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.
According to mform, the average in February 2007 increased to 5.34% and the average SVR was 6.12% meaning 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, says: “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.”
Mform says around 87% of mortgage applicants have been applying for a fixed rate deal through its site in response to an expected base rate jump.
However, it warns those looking to take out a new fixed rate deal need to act quickly as some lenders are removing or repricing their offers.
Ghiloni adds: “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generally allow a borrower around three months to take up a deal and once an offer is made it is unusual for it to be withdrawn.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.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Scott Sinclair on 020 7034 2636 or email [email protected]IFAonline
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