Martin Lewis explains whether you should still re-fix your mortgage now as deals pulled
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MSE founder Martin Lewis said people on fixed term mortgage deals should take action now if they have three to six months left before their homeloan term runs out
The mortgage market is in turmoil this week (
Image: Ken McKay/ITV/REX/Shutterstock)
MoneySavingExpert founder Martin Lewis said the mortgage market is in “turmoil” – and what actions homeowners with fixed-term homeloans should take.
This week mortgage lenders began pulling deals from the market, with around 1,000 were removed in just 24 hours.
Others are hiking homeloan rates.
House sales are also starting to fall through as lenders pull mortgage offers in reaction to the mini-Budget.
Speaking in the latest MoneySavingExpert email, Mr Lewis said: “So, no surprise the mortgage market is in turmoil.
“Some big lenders – such as Virgin Money, Skipton, Halifax and Santander – have pulled deals completely from the market, meaning less choice for mortgage switchers.
“Others are being replaced by ones with more expensive rates.”
If you are on a fixed-rate mortgage, Mr Lewis advised homeowners to check when it ends – and to act three to six months ahead of that point.
He added: “If you’re coming towards the end of your deal, act now. Some lenders let you lock in a rate six months in advance – and many more let you lock in three months ahead.”
As a rule of thumb, Mr Lewis said if your fixed rate ends before March 2023 then check deals now, as rates are likely to go up further.
If your fixed rate deal isn’t ending soon, switching is a tricky situation.
Mr Lewis said: “The concept is ‘should I ditch a little time on my current cheap fix, to lock in for longer and prevent hideous rises in future?’
“On the surface it looks a sensible question, but there are a number of things to consider.”
One of these is early repayment penalties.
Mr Lewis said: “Ditching your fixed rate mortgage before it ends will normally result in an early repayment charge – something that can cost you £1,000s and, in normal times at least, make ditching a fix prohibitive.”
Another thing to consider is that switching early means taking a bet on what mortgage rates will be in the future.
Mr Lewis said: “While it looks like they are going to be far, far higher in future, if there’s anything the past few years has taught us, it’s that unknown unknowns could flip that around at speed. There are no guarantees, and without a crystal ball, we don’t know how much rates will rise by.
“If this is something you’re considering, we’d push you to speak to a mortgage broker, who’ll can run you through the pros and cons to see if it’s worth it.”
Mr Lewis added that the situation was “nearly unprecedented” and that “no-one really knows what’s coming next”.
If you have a fixed rate mortgage, there is no change to what you pay until your homeloan term is up.
Once it ends – normally after two, three, five or 10 years – you will either have to remortgage onto a new deal or stay with your current lender.
If you stay with your existing lender, you will fall onto their standard variable rate (SVR) if you don’t take out a whole new deal with them.
Mr Lewis said SVR rates were normally around 5% to 6% – but these could go up further if rates rise.
The MoneySavingExpert founder added: “Or you can fix again – which is still likely to be cheaper – but still far, far more expensive than your current fix – after so many years of low rates.”
“It’s worth noting that 10-year fixed deals look much better value, because the current interest rate crisis is seen more as a short-to-medium term thing.
“So if you fancy a 10-year fix (in most cases that means you’re pretty sure you won’t move in that time), it’s something to discuss with your broker.”