Martin Lewis Explains ‘Real Worries’ About Mortgages – ‘Fixing Longer’ | Personal finance | Finance
Savers could benefit from the Bank of England’s base rate hike to 1%, but this increase will further hurt mortgage borrowers and businesses, which face higher borrowing costs. On The Martin Lewis Money Show: Live this week, the money-saving expert addressed listeners’ concerns about what the base rate hike could mean for mortgages.
Krishna sent an email saying that his fixed rate mortgage was coming to an end. However, he was unsure whether he should consider a two-year fixed contract or a five-year fixed contract.
The money-saving expert explained that he has “real concerns” about mortgage rates right now.
Six months ago people could get mortgages below 1%, but now the cheapest options are now double at 2.1%, so the cost of getting a mortgage is going up , did he declare.
Mr Lewis continued: ‘If I’m being honest, I have real concerns about mortgages right now.
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“That’s the concern – we’re seeing rates go up, but you also have to remember that in order to get a mortgage and be accepted, you have to pass a credit check and a financial capability check.
“Affordable check checks if you have room to pay that mortgage? Now we are clearly in the middle of a cost of living crisis, so everyone has less room than before because other costs have gone up.
“So my big fear is that we will see interest rates go up and fewer people being accepted when they apply for a cheap mortgage because more will fail affordable checks.”
As more and more people failed accessibility checks, the money-saving expert believed it left Britons with a ‘ticking time bomb’.
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“Talk to a mortgage broker for help.
“If rates are going up and you want certainty and you can get a cheap five-year deal, then you can get certainty.
“I can’t promise it will be cheaper in hindsight, but if you want peace of mind in an uncertain world and we are in an uncertain world, then fix and fix longer.”
As mortgage rates continue to rise, Martin Lewis has warned homeowners to start mending now to avoid potentially crippling increases in mortgage repayments.
Will Rhind, head of mortgage advice at Habito, commented on Lewis’s suggestions. He said: “Martin Lewis spoke of a ‘mortgage time bomb’ on the Martin Lewis Money Show Live and expressed concern about rising interest rates and changes in consumer affordability in the face of the current cost of living crisis.
“With four rate hikes already in place in less than six months, we expect UK homeowners with an existing mortgage to see very different rates on their next re-mortgage. We urge all mortgage holders with six months before their fixed rate ends talking to a mortgage broker across the open market to explore what options are available to them now so they can start planning ahead in these unstable times .
“Mortgagers should keep in mind that if they choose to mend for two years at a time, they could end up remortgaging up to 10 times over the life of the average mortgage. Most transactions come with a fee of £999 payable each time, meaning this remortgage round could cost around £10,000 in handling fees.
“Homeowners may be better off exploring a longer-term solution of more than 10 years or more to protect against further interest rate hikes and uncertainty over the life of their mortgage.
“With Habito One, for example, the interest rate is guaranteed longer, until you pay it back. There are no prepayment charges or exit fees, which means owners have complete flexibility and freedom to leave at any time, switch plans, make unlimited overpayments, relocate, or repay their mortgage in advance without any penalty or hidden costs.
The Martin Lewis Money Show: Live is available to watch not on the ITV hub.