Borrowers on Standard Varialbe Rate should re-mortgage
7 March 2012
Mortgage spokesman John Pokora said: “The recent news that Halifax is hiking its SVR from 3.50% to 3.99% from May illustrates some borrowers won’t necessarily have to wait for the base rate to rise before their mortgage payments start to climb again.”
A rate rise of just 0.5% would mean a £43 per month jump in mortgage payments for homeowners with a £150,000 variable repayment mortgage currently paying 4.00%.
Pokora added: “With base rate expected to remain unchanged for the foreseeable future some may be willing to stick with a variable rate deal.
“If this is the case a tracker is a safer option than a discount because tracker mortgages are directly linked to base rate and changes will mirror the movement of base rate.
“Discounts on the other hand are linked to the lender’s SVR so there is a risk that the mortgage rate may go up even if base rate remains unchanged.”
Pokora said that if a borrower was worried about higher mortgage payments a fixed rate would give protection against future base rate increases.
He said: “5-year fixes are popular at the moment. The risk of going for a shorter-term fix is that the fixed period could end as interest rates are rising so you could find yourself having to remortgage when rates are higher than they are at the moment.”
A future base rate rise would have a real impact on 35% of homeowners’ finances, research from Partners Financial revealed.
A further 26% stated they would have to make cutbacks to their day-to-day spending.
Today marks the third anniversary since the Bank of England base rate dropped and remained at a record low of 0.5%.
A quarter of homeowners have benefited from reduced mortgage repayments over time however 43% used the additional cash to pay rising utility bills and cover the increased cost of living.
Almost a quarter of borrowers used the extra cash to overpay their mortgage.
Pokora went on to say that it was clear borrowers had got used to lower repayments and their finances could be severely impacted should there be any change to the rate.
He said: “Over the past three years some borrowers have benefited from the low interest rate environment with reduced monthly mortgage repayments.
“However with the high cost of living, many have been forced to use the extra cash from their reduced mortgage repayments to bridge the gap of their shortfalls for essential outgoings.”
For enquiries visit: www.partnersfinancial.co.uk
FOR MORTGAGE ADVICE THOMAS MORRIS CAN INTRODUCE YOU TO PARTNERS FINANCIAL.