As the Bank of England hikes interest rates for the first time in more than three years, Brian Murphy, Loan Manager at Mortgage Advice Bureau, shares his top tips homeowners should consider to help them manage the mortgage. ‘to come up.
Explore foreclosure of a fixed rate mortgage
Existing borrowers whose mortgages are directly tied to the discount rate may see an increase in monthly repayments. Those who use lender return rates or Standard Variable Rates (SVRs) will have to wait and see if their lender will pass on the rate increase in whole or in part, while those who have a rate mortgage. follow-ups are more likely to see rates passed on in full, and possibly upon their next mortgage payment.
A fixed rate mortgage could provide temporary refuge from upcoming interest rate hikes because their fixed interest rates are guaranteed for a set period of time. If you’re making a new mortgage, be sure to talk to your lender about the terms of your mortgage, as there may be exit fees or prepayment charges to consider.
It is not uncommon to find that any hint of an increase can have an impact on the market and therefore on the mortgage offers offered and for how long. The sooner consumers act, the more likely they are to get a rate close to the lowest levels ever. For most people, a remortgage is a fairly straightforward process and certainly not something to worry about.
Likewise, for those who are nearing the end of their current fixed rate mortgage contract or are considering new borrowing, it may be beneficial to contact a broker or lender to initiate the process as early as possible in order to obtain a competitive agreement.
Shop around for the best deal
Whether you are a new buyer or looking to remortgage, be sure to shop around. A mortgage broker can help you find the best deal for your situation and factor in the real costs. It is important not only to think about the overall rates, but also to assess the additional charges that may be involved.
Find out what you can afford
Creating a budget based on your income and expenses will help you see areas where you can potentially cut back and save, either to increase your deposit or to assess whether you can overpay your mortgage. It can also help you build a savings reserve for unforeseen finance costs or bills in the future.
To help you calculate your monthly mortgage payments or even your overall monthly expenses, try our mortgage repayment calculator Where budget calculator. A mortgage advisor can also help you with budgeting and affordability – this will be the first thing they look at to make sure you can pay the mortgage payments now and in the future.
Paying too much for your mortgage if and when you can
Since mortgage interest accumulates on the full amount of your mortgage over its life, consider overpaying to reduce the amount on which interest is charged. This can not only help you pay off your mortgage debt faster, but also save you a lot of money in the long run. For example, if you have a 25-year mortgage of £ 100,000 with an interest rate of 4% and you pay off an additional £ 100 per month, you can reduce your mortgage term by six years and save $ 15. £ 534 on interest.
Keep in mind if you can overpay on your mortgage without penalty. A 10% per annum overpayment facility without incurring penalties is fairly typical of many products. If there are prepayment charges, it’s worth talking to your mortgage advisor to see if the overpayment charge outweighs the other benefits of overpayments.
* Brian Murphy, Loan Manager at Mortgage Advice Bureau