MORTGAGE payments are potentially set to rise for hundreds of thousands of people in the coming months. However, there may be a way in which some borrowers can reduce their expenditure.
A mortgage is a significant commitment, with the average mortgage term spanning 25 years, according to The Money Advice Service. However, it’s not just securing a mortgage ahead of buying a house which homeowners need to think about.
For those on fixed mortgage terms, being aware of when they end and their options thereafter could be very important indeed.
When a fixed mortgage term ends, borrowers can be rolled onto the lender’s Standard Variable Rate (SVR).
And, research suggested that rolling from a fixed mortgage deal onto an SVR mortgage could mean costs increase.
According to Comparethemarket.com, homeowners rolled onto Standard Variable Rate mortgages are set to pay an extra £2,000 per year in interest.
The price comparison website has said that rolling from a fixed onto a Standard Variable Rate mortgage could increase monthly costs by £175.
Comparethemarket.com said that 10 percent of households on fixed mortgage terms are seeing those deals come to an end in the next six months.
This equates to around 850,000 homes.
Meanwhile, research has also found that one in ten (11 percent) have stuck with a tracker mortgage because they’re worried about meeting lender eligibility criteria.
With the UK having spent months in lockdown so far, the coronavirus crisis is already having an economic impact.
During the COVID-19 pandemic, Mark Gordon, Director of Money at Comparethemarket.com has shared his insight on the mortgage market during this unprecedented time.
He said: “Before the coronavirus pandemic, the latest data suggested how strong the property and mortgage markets were, with mortgage approvals at a six-year high [according to the Bank of England].
“Within the space of a few weeks, this stance has completely changed.
“With in-person valuations and property viewings unable to take place, we have seen some lenders stop offering products to new customers looking for higher loan to value deals, so that they can focus on supporting their existing customer base and organise mortgage payment holidays.
“The government also took the unprecedented decision to stop all house purchase transactions, in effect, freezing the market.
“The uncertainty of Brexit lingered over the housing market for years.
“However, we’re confident that once this crisis is over we will see, hopefully, a quicker bounce back.
“While it is going to be a tough and bumpy road to get there, we must remember the foundations of the market remain strong.
“While remortgaging isn’t at the forefront of people’s minds, understandably, for those coming to the end of their fixed rate mortgage deal, it could be worthwhile looking around online to see what deals are still on offer and whether you could pay less.
“Those on tracker mortgages, for example, are benefiting from the latest Bank of England base rate cut to 0.1 percent – a record low in its 325 year history – with certain lenders now passing these savings on to customers.”