It has been talked about before, but the time is coming nearer and nearer when more than two million homeowners will come to the end of their cheap two-year fixed rate deals. The will either slump onto the lender’s Standard Variable Rate (SVR) (although let’s hope they’re alert enough not to let that happen), or they will have to find a new deal. Even the latter will give them much more expensive borrowing that they had before.
Experts reckon that they could be in for mortgage bills a third or more higher. Given that tax is on the increase and fuel is rising inexorably this will not be good timing. Household bills are about to soar where income will not.
If you are on one of these fixed rate deals then you need to get ahead of the game. Find out when your deal expires and calculate what your new payments are likely to be – there are plenty of mortgage calculators on the internet. Ask your mortgage adviser what deal he/she would recommend to replace your deal and avoid you going onto the SVR. Consider a moving rate deal rather than a fixed as lenders have already built in the last rise and anticipation of another one into their fixed rates. You will only get badly hit if there are two or more interest rate rises, and most experts think 6% will be the peak.
If the Bank does raise rates above 6%, it may well be forced to bring them down again very quickly. The housing market looks as though it is nearing a peak and while it may not crash it is likely to stay flat for a year or two. With families at the extent of their budgets, spending could stop and drop dramatically, which may mean the Bank will have to cut rates to re-ignite the economy.
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