Defaqto suggests remortgaging may be advisable following base rate rise

Posted on Monday, November 13 by Joy Tibbs

The 0.25% increase to the Bank of England base rate will mean an average rise of £22 per month (£264 per year), based on a typical existing mortgage of £180,000 with 20 years remaining. For first-time buyers (FTBs) the increase will mean an average rise of £19 per month (£228 per year), based on a typical FTB mortgage of £150,000 over 25 years remaining.

Defaqto asserts that mortgage providers are constantly changing their products to compete, and despite this rate rise there are still “a great many good deals” available.

The company claims that 85% of fixed-rate mortgage providers and 31% of variable-rate mortgage providers have changed their rates in the past month, with the majority raising them. Therefore, it suggests that customers nearing the end of a fixed-rate or discount-rate deal, and those on a standard variable rates, should review their mortgage options with a mortgage broker sooner rather than later.

Its advice is as follows: “If your fixed deal ends and you move on to variable rates, you are likely to see a large increase in your repayments. If you change to a new fixed-rate deal, you are quite likely to see a reduction in your mortgage.

“Even if you have an early redemption penalty on your current fixed-rate deal, it might be cheaper to remortgage now and pay the redemption charge.”

Brian Brown, Defaqto’s head of insight for banking and general insurance adds: “The bank rate rise has been widely anticipated, by both mortgage providers and their customers…Customers though don’t need to panic, as this was a relatively small increase. Any further rate rises are likely to be gradual and there is plenty of time to consider other options. 

“We would encourage consumers to calculate the costs of switching their mortgage, even if they are not quite at the end of any penalty period. In particular, those coming to the end of fixed-rate deals and those on standard variable rates should see a mortgage broker to discuss their options for their next mortgage deal.”

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