Since December 2021, the Bank of England has put up interest rates several times and this has meant that mortgage rates have steadily become higher.
Most homeowners are on a fixed rate mortgage deal and will be unaffected by the rise, but homeowners looking to remortgage at the end of their current deal along with first-time buyers will be affected. However, there are some things you can do to help offset these rises.
A fixed-term mortgage deal means that you are protected from any increases for either 2, 5 or 10 years (longer fixed terms are available but this level of commitment needs some considerable thought). Unlike a variable rate mortgage, your mortgage will stay the same for the term of the mortgage. However, it’s important to look ahead and decide if you are willing to be tied in for a set amount of time because you could have to pay an early redemption penalty especially if you have opted for a 10-year fixed deal. Some lenders will let you ‘port’ the mortgage to your new home.
If you want to keep your mortgage down, you should opt for a longer term. Depending on your age, you could opt for a 30-year mortgage instead of the standard 20- or 25-year mortgage. Although you will end up paying back more, your montly repayment will be lower. Some lenders offer a 40-year mortgage term but eligibility will depend on how old you are when you first take out the loan.
Although overpaying won’t result in lower repayments it will offset the higher interest as you’ll be reducing the amount of outstanding debt you owe so you’ll be charged less interest overall.