Homeowners kicking back and enjoying sustained low rates on their mortgage could be jolted into taking action sooner than they thought...
Recent figures have revealed the annual rate of inflation leapt from 1.9% to 2.9% in December, prompting some economists to say that the Bank of England base rate - which has been slumped at 0.5% since March last year - may start to rise again, sooner than anticipated.
Current state of play
Tracker mortgages - that mirror movements in the Bank of England base rate - are by far the most popular deals, according to brokers. This is because, not only are initial rates cheaper than their fixed rate counterparts, but there has been a consensus that the base rate would not climb any time soon.
"People who have even just a little slack in the budget have been taking a calculated risk and opting for a tracker as interest rates looked set to stay low," explained David Hollingworth at mortgage broker L&C Mortgages. "The best tracker deals are priced about 2.5% to 3.0% on a two-year term, while the cheapest fix for the same period will cost from 3.5%."
But if base rate starts to climb, so will the monthly outgoings of those homeowners on tracker deals - and this is causing a marked shift in sentiment.
According to recent research from Santander Mortgages, of the 880,000 homeowners due to remortgage in the next six months, only 13% say they will opt for a tracker deal compared to 33% two months ago. And the number of those likely to opt for a fixed rate has increased from 20% to 23% in the last month alone.
Phil Cliff, director of mortgage marketing at Santander UK, said: "With many commentators predicting a base rate rise this year, homeowners now seem more inclined to play it safe with a fixed rate deal."
Getting into a fix
But what's out there for homeowners who want to fix in their rate? Some lenders have actually been edging down the prices of these deals. Santander recently slashed the rate on some of its two-year fixes by up to 0.4%. The bank now offers a deal priced at 4.99% in return for a 20% deposit and £995 fee.
Yorkshire Building Society was quick on its heels, launching a two-year fixed rate mortgage priced at 3.29% for borrowers with access to a 40% deposit. This represents the lowest two-year fix available direct to consumers, says the mutual - but be warned as the deal also comes with a hefty £1,195 arrangement fee.
And the end of last week saw Legal & General launch a range of two-year fixes in conjunction with Accord Mortgages. It includes a two-year fixed rate priced at 3.49% for those with a 25% deposit and a £995 fee. "Competitive fixed rate deals will be very attractive to anyone worried by the recent news on inflation," said Martyn Smith, the company's head of mortgage products.
Source
Monday, February 15, 2010
Monday, December 28, 2009
Remortgages: Defending a Man’s Castle?
In the present state of the economy, and considering the fragile and tentative recovery that many believe that we are experiencing, the property market is continuing to be frequently used as a barometer of the effects of the recession. While the latest statistics would argue that the United Kingdom is still within the recession and experiencing the effects with more severity than ever, property market experts are reluctant to write off the recent upturn in mortgage lending.
Donna Green examines the divide between the mortgage and remortgage market, considering the impact of the latest news that the sectors of mortgage lending and equity release are on the long road to economic recovery.
The latest news that the division between the mortgage and remortgage lending rates has widened throughout 2009 demonstrates that while some sectors are experiencing a resurgence in economy, others continue to experience the full effects of the downturn. The Director General of Self Home Income Plans, Andrea Rozario, has given an analysis of the equity release market within the property industry, however acknowledged the nature of division evident in recovery.
“While equity release providers are experiencing high levels of customer demand, a significant impact on the quarter's business figures has been the lack of liquidity in the overall market.”
Furthermore, the stagnant characteristics that the markets are currently offering details a difficult set of circumstances under which to make specific financial decisions regarding properties. As previously reported, the record low interest rates set by the Bank of England are allowing many mortgage providers to offer competitive rates on mortgage loans, in many cases eliminating any demand for refinancing or remortgage loans.
In much the same way, the equity release market has suffered with plummeting demand throughout the recession, however can be seen to be tentatively beginning to recover. The statistics released by Self Home Income Plans document a mid-year growth from the statistics available from the start of the year and since the third quarter of 2008, the amount of equity released from properties has risen, further attesting to the assertions within the property market of an economic upturn.
With the recent news on proposed pension reforms, retirement ages and legal action taken against unprofessional pension providers, these figures come as welcome news to those seeking to draw income from the value of their properties. In comparison with the remortgage market, the equity release market can be argued to have fared better throughout the economic turmoil by virtue of the fact that it is not as heavily reliant upon the economy. Whilst equity release is obviously directly linked to house prices, unlike the remortgage market, it is not wholly underpinned by Bank of England interest rates.
Tuesday, December 15, 2009
Purchase loans up by 77% but remortgages plunge
The number of remortgage approvals plummeted by 60 per cent to 21,282 last month from 52,717 in September 2008, according to figures from the British Bankers’ Association.
House purchase approvals rose by 77 per cent over the same period from 23,808 to 42,088, with £5.9bn of house purchase loans approved in September compared to £3.2bn in the same month last year.Legal & General director of mortgages Ben Thompson says: “The remortgage market is as dead as a dodo, according to the figures from the BBA, and let’s face it, this situation is not going to change much for a long time to come. As long as the bank rate stays this low - and why shouldn’t it given today’s GDP figures? - then there is little incentive for borrowers to shift from their standard variable rate.”
BBA statistics director David Dooks says: “Mortgage lending by the high-street banks is continuing to improve from the lows seen earlier this year and the number of house purchase approvals continues to recover.
“Housing market activity will depend, however, on more properties coming on to the market.”
Source
House purchase approvals rose by 77 per cent over the same period from 23,808 to 42,088, with £5.9bn of house purchase loans approved in September compared to £3.2bn in the same month last year.Legal & General director of mortgages Ben Thompson says: “The remortgage market is as dead as a dodo, according to the figures from the BBA, and let’s face it, this situation is not going to change much for a long time to come. As long as the bank rate stays this low - and why shouldn’t it given today’s GDP figures? - then there is little incentive for borrowers to shift from their standard variable rate.”
BBA statistics director David Dooks says: “Mortgage lending by the high-street banks is continuing to improve from the lows seen earlier this year and the number of house purchase approvals continues to recover.
“Housing market activity will depend, however, on more properties coming on to the market.”
Source
Saturday, November 28, 2009
Five of the best mortgage deals
Borrowers will need a deposit or equity of 40 per cent of the value of the property, although the bank offers a similar loan charging 2.49 per cent to those who have a 25 per cent deposit. There is a fee of £1,199 in either case.
One caveat is that the interest rate is linked to HSBC's standard variable rate (SVR), which it can change at will, rather than the Bank of England's official rate. At the end of the two-year introductory offer, under which the rate you pay is 1.95 percentage points below the SVR (currently 3.94 per cent), the rate will revert to the standard variable rate itself.
David Hollingworth of London & Country Mortgages, a broker, said: "This deal offers an extremely eye-catching rate and there really is no direct competition."
TWO-YEAR FIX FROM FIRST DIRECT, INITIAL RATE 3.49 PER CENT
If you would rather not have to worry about interest rates changing and want to be sure that your monthly repayments are fixed for a set number of years, there are a number of competitive fixed-rate mortgages on the market.
The lowest two-year fixed rate is from First Direct, according to Mr Hollingworth. The rate is 3.49 per cent, but borrowers will need to be careful to factor in the large fee, £1,298, to make sure that it represents the best deal for them. The rule of thumb is that the bigger the loan, the less significant the fee.
This mortgage is also for amounts of up to 60 per cent of the property value. For people wanting to borrow 75 per cent, the lender will charge interest at 3.94 per cent - "this also represents good value", Mr Hollingworth said.
Alternatively, moneyfacts.co.uk, the information service, recommends NatWest's two-year fix for 75 per cent loans at 3.69 per cent with a fee of £799.
FIVE-YEAR FIX FROM NEWCASTLE BUILDING SOCIETY, INITIAL RATE 4.99 PER CENT
Some borrowers are reluctant to fix for just two years, on the basis that many economists expect Bank Rate to remain very low for some or all of that period, making a variable rate such as HSBC's more attractive. After all, why fix at 3.49 per cent for two years if you think you will pay 1.99 per cent for two years with a tracker?
But as few expect rates to remain so low for five years, a longer-term fixed rate could make more sense.
Newcastle's five-year fix charges a rate that ranks alongside the lowest available over that period but is also offered for up to 75 per cent of the property value, where others, such as a 4.95 per cent deal from HSBC, are available only at 60 per cent. Mr Hollingworth said: "This is a great deal for those looking for medium-term security." The fee is £994.
THREE-YEAR TRACKER FROM ABBEY, INITIAL RATE 2.99 PER CENT
Another mortgage that illustrates the fact that borrowers will, initially at least, pay less with trackers than with fixes.
This loan charges 2.49 percentage points above Bank Rate for three years, meaning that you would currently pay 2.99 per cent. At the end of the introductory offer the rate reverts to Abbey's SVR, currently 4.24 per cent.
Borrowers need a deposit of at least 30 per cent and there is a fee of £995, although Abbey will pay for the valuation and legal work.
OFFSET LIFETIME TRACKER FROM WOOLWICH, INITIAL RATE 2.97 PER CENT
Some borrowers would prefer a loan that they can stick with for the whole term, avoiding the need to remortgage every few years.
This mortgage tracks Bank Rate for the entire term, charging 2.47 percentage points above the Bank of England rate. Borrowers need a 30 per cent deposit and will pay a fee of £1,499; there is also an early repayment charge for the first three years.
As this is an offset loan, borrowers can use their savings to help reduce the interest bill.
Source
One caveat is that the interest rate is linked to HSBC's standard variable rate (SVR), which it can change at will, rather than the Bank of England's official rate. At the end of the two-year introductory offer, under which the rate you pay is 1.95 percentage points below the SVR (currently 3.94 per cent), the rate will revert to the standard variable rate itself.
David Hollingworth of London & Country Mortgages, a broker, said: "This deal offers an extremely eye-catching rate and there really is no direct competition."
TWO-YEAR FIX FROM FIRST DIRECT, INITIAL RATE 3.49 PER CENT
If you would rather not have to worry about interest rates changing and want to be sure that your monthly repayments are fixed for a set number of years, there are a number of competitive fixed-rate mortgages on the market.
The lowest two-year fixed rate is from First Direct, according to Mr Hollingworth. The rate is 3.49 per cent, but borrowers will need to be careful to factor in the large fee, £1,298, to make sure that it represents the best deal for them. The rule of thumb is that the bigger the loan, the less significant the fee.
This mortgage is also for amounts of up to 60 per cent of the property value. For people wanting to borrow 75 per cent, the lender will charge interest at 3.94 per cent - "this also represents good value", Mr Hollingworth said.
Alternatively, moneyfacts.co.uk, the information service, recommends NatWest's two-year fix for 75 per cent loans at 3.69 per cent with a fee of £799.
FIVE-YEAR FIX FROM NEWCASTLE BUILDING SOCIETY, INITIAL RATE 4.99 PER CENT
Some borrowers are reluctant to fix for just two years, on the basis that many economists expect Bank Rate to remain very low for some or all of that period, making a variable rate such as HSBC's more attractive. After all, why fix at 3.49 per cent for two years if you think you will pay 1.99 per cent for two years with a tracker?
But as few expect rates to remain so low for five years, a longer-term fixed rate could make more sense.
Newcastle's five-year fix charges a rate that ranks alongside the lowest available over that period but is also offered for up to 75 per cent of the property value, where others, such as a 4.95 per cent deal from HSBC, are available only at 60 per cent. Mr Hollingworth said: "This is a great deal for those looking for medium-term security." The fee is £994.
THREE-YEAR TRACKER FROM ABBEY, INITIAL RATE 2.99 PER CENT
Another mortgage that illustrates the fact that borrowers will, initially at least, pay less with trackers than with fixes.
This loan charges 2.49 percentage points above Bank Rate for three years, meaning that you would currently pay 2.99 per cent. At the end of the introductory offer the rate reverts to Abbey's SVR, currently 4.24 per cent.
Borrowers need a deposit of at least 30 per cent and there is a fee of £995, although Abbey will pay for the valuation and legal work.
OFFSET LIFETIME TRACKER FROM WOOLWICH, INITIAL RATE 2.97 PER CENT
Some borrowers would prefer a loan that they can stick with for the whole term, avoiding the need to remortgage every few years.
This mortgage tracks Bank Rate for the entire term, charging 2.47 percentage points above the Bank of England rate. Borrowers need a 30 per cent deposit and will pay a fee of £1,499; there is also an early repayment charge for the first three years.
As this is an offset loan, borrowers can use their savings to help reduce the interest bill.
Source
Sunday, November 15, 2009
Northern Rock introduces flexible mortgage range for residential purchase customers
Northern Rock has launched a range of mortgages for residential purchase, a 2-year Flexible Fixed Rate from 3.99% up to 65% LTV, a 5-year Flexible Fixed Rate from 5.69% up to 65% LTV, and a 2-year purchase Flexible Tracker Rates from 2.99% up to 65% LTV.
The new two-year Flexible Tracker mortgage is available to residential purchase customers for 2.99% (BOE + 2.49%) with a £995 Product Fee, or with no Product Fee for 3.79% (BOE + 3.29%), Both options are offered to a maximum of 65% LTV.
Two-Year Flexible Fixed Rate mortgages for purchase customers are now available from just 3.99% with a £995 Product Fee or from 4.89% for customers who choose a Fee Saver Option.
A two-year Flexible Fixed Rate is available at 5.19% at 75% LTV with no Product Fee, or the lower rate of 4.55% with a Product Fee of £995.
Five-year Flexible Fixed Rates are also on offer to residential purchase customers starting from 5.69% with a £995 product fee, or from 6.19% with no Product Fee for loans up to 65% LTV
Remortgage products are also available with the added incentives of free basic valuations and free standard legal fees.
Source
The new two-year Flexible Tracker mortgage is available to residential purchase customers for 2.99% (BOE + 2.49%) with a £995 Product Fee, or with no Product Fee for 3.79% (BOE + 3.29%), Both options are offered to a maximum of 65% LTV.
Two-Year Flexible Fixed Rate mortgages for purchase customers are now available from just 3.99% with a £995 Product Fee or from 4.89% for customers who choose a Fee Saver Option.
A two-year Flexible Fixed Rate is available at 5.19% at 75% LTV with no Product Fee, or the lower rate of 4.55% with a Product Fee of £995.
Five-year Flexible Fixed Rates are also on offer to residential purchase customers starting from 5.69% with a £995 product fee, or from 6.19% with no Product Fee for loans up to 65% LTV
Remortgage products are also available with the added incentives of free basic valuations and free standard legal fees.
Source
Wednesday, October 28, 2009
How to avoid remortgaging pitfalls
The offer of a new remortgage deal with a lower interest rate may be tempting – but there are a number of pitfalls to be wary of to make sure you get a good deal.
Early repayment charges (ERCs)
Early repayment or redemption charges (ERCs) are used by lenders to keep homeowners with them over the course of a set period.
For short-term fixed-rate mortgages, ERCs usually stand for the length of the initial deal – and are dropped when the mortgage switches to the lender's standard variable rate.
Before remortgaging it is worth checking the small print of your current deal to see when the ERCs stop applying – so you are not hit by a lender's higher standard variable rate (SVR) for too long or the ERCs themselves by switching too early.
On longer-term mortgages – of five, ten or 25 years – the ERCs tend to reduce over the length of the deal.
Those planning debt consolidation loans should also put ERCs into their calculations – if remortgaging to bring together all their debts.
Remortgaging costing more than saving
It is easy to be seduced by the lower rates on a remortgage deal – but it is necessary to factor in all the costs of switching lenders. Sometimes the extra costs can outweigh any potential gains.
Beyond ERCs (above) remortgagers also face legal fees and valuation fees. Usually the new lender will pay these costs – but not all lenders do and not in all situations.
New lender's fees
Fees when you start a mortgage are increasingly common and something to add to calculations when considering whether it makes sense to remortgage or not.
Setting up a new mortgage can leave you facing arrangement fees and reservation fees. Remortgage deals exist without the fees – but often the interest rates are higher.
Other costs include valuation fees – as the mortgage lender assesses the value of the property they are lending against - and legal fees. However many lenders do offer to cover these costs.
Higher lending charges could also be payable if you are borrowing over 90 per cent of the value of the property.
Those opting for a remortgage deal through a broker could face paying their fees – depending on whether the broker charges a fee or receives commission from a lender.
Daily or annual interest
A detail often missed when choosing a new mortgage deal is whether interest is calculated daily or annually.
It may seem like there is little difference between daily and annual interest – but with interest calculated annually it is only after a year of repayments that you benefit from a cut in repayments.
When a mortgage's interest is calculated daily as you repay, the amount owed is reduced and so are the repayments.
Source
Early repayment charges (ERCs)
Early repayment or redemption charges (ERCs) are used by lenders to keep homeowners with them over the course of a set period.
For short-term fixed-rate mortgages, ERCs usually stand for the length of the initial deal – and are dropped when the mortgage switches to the lender's standard variable rate.
Before remortgaging it is worth checking the small print of your current deal to see when the ERCs stop applying – so you are not hit by a lender's higher standard variable rate (SVR) for too long or the ERCs themselves by switching too early.
On longer-term mortgages – of five, ten or 25 years – the ERCs tend to reduce over the length of the deal.
Those planning debt consolidation loans should also put ERCs into their calculations – if remortgaging to bring together all their debts.
Remortgaging costing more than saving
It is easy to be seduced by the lower rates on a remortgage deal – but it is necessary to factor in all the costs of switching lenders. Sometimes the extra costs can outweigh any potential gains.
Beyond ERCs (above) remortgagers also face legal fees and valuation fees. Usually the new lender will pay these costs – but not all lenders do and not in all situations.
New lender's fees
Fees when you start a mortgage are increasingly common and something to add to calculations when considering whether it makes sense to remortgage or not.
Setting up a new mortgage can leave you facing arrangement fees and reservation fees. Remortgage deals exist without the fees – but often the interest rates are higher.
Other costs include valuation fees – as the mortgage lender assesses the value of the property they are lending against - and legal fees. However many lenders do offer to cover these costs.
Higher lending charges could also be payable if you are borrowing over 90 per cent of the value of the property.
Those opting for a remortgage deal through a broker could face paying their fees – depending on whether the broker charges a fee or receives commission from a lender.
Daily or annual interest
A detail often missed when choosing a new mortgage deal is whether interest is calculated daily or annually.
It may seem like there is little difference between daily and annual interest – but with interest calculated annually it is only after a year of repayments that you benefit from a cut in repayments.
When a mortgage's interest is calculated daily as you repay, the amount owed is reduced and so are the repayments.
Source
Thursday, October 15, 2009
Goodbye to the 0pc mortgage
Thousands of home owners who are currently enjoying rock-bottom mortgage rates will soon see these ultra-cheap deals come to an end.
Borrowers lucky enough to have snapped up tracker deals with Halifax, Cheltenham & Gloucester (C&G) and Birmingham Midshires two years ago have been paying zero interest on their mortgage for the past six months.And many more home owners have been enjoying rates of less than 1pc – with Abbey, Alliance & Leicester, Intelligent Finance and Saffron Building Society all previously selling tracker deals that offered substantial discounts off the Bank Rate – which has stood at just 0.5pc since March.
But in the next few months tracker deals will all expire, causing a sharp increase in monthly mortgage payments for many families.
For example, those on a popular Halifax tracker – which charged a rate equivalent to 0.51 percentage points below the Bank Rate – have been paying just £544 a month since March, assuming they had a £150,000 mortgage. These families will now have to find an additional £250 a month when they are moved back onto Halifax's standard variable rate (SVR) which currently stands at 3.5pc. On a £150,000 mortgage this will mean mortgage repayments of £792 a month.
Melanie Bien, a director of independent mortgage broker Savills Private Finance said: "Many mortgage holders face a payment shock in the coming weeks and months, as they come to end of the super-cheap tracker rate."
Richard Morea of mortgage brokers London & Country added: "Many home owners have been paying next to no interest on their mortgage. But these deals will end very shortly. These borrowers need to look closely at their circumstances to decide whether they want to remortgage now or not."
But Mr Morea points out that not all of these deals will automatically revert to the bank's SVR. Many of these mortgages offered "lifetime tracker" options, which still look competitive today.
For example, those coming to the end of one of Alliance & Leicester two-year tracker deals will pay just 0.99 percentage points above the Bank Rate for the life of the mortgage – giving a pay rate today of just 1.49pc. This is significantly below A&L's SVR of 4.99pc and likely to be more competitive than any mortgage deal available on the high street.
Intelligent Finance, Saffron Building Society and other A&L tracker mortgages all offer similar options.
And remember, borrowers are automatically moved onto this rate. There is no arrangement fees or legal costs to pay, and there will be no penalties for switching at a later date.
In contrast most trackers offered by Halifax, Abbey and C&G move customers straight onto that bank's SVR.
Mr Morea adds: "It is imperative the home owners find out from their lenders what rate they will pay when their current deal ends, before they look at remortgaging." Given the generosity of many of these deals, lenders are probably not going out of their way to highlight what a good rate you'll have. So make sure you ask the right questions – and don't assume you will be automatically move onto the SVR.
Those that don't have the option of a "go to" rate should check what SVR will be charged.
At one end of the scale is C&G and Nationwide building society – both charging a competitive 2.5pc. Those moving to this rate are still going to see an increase in their monthly mortgage payments – but they are unlikely to find another mortgage deal significantly cheaper, in the short term at least.
However Abbey is charging 4.24pc while both Woolwich and A&L charge 4.99pc. But these look cheap when compared to the SVRs charged by many smaller building societies. According to Moneyfacts, the financial information group, at least 20 charge more than 5pc, with the most expensive being Stroud & Swindon, Newcastle and Nottingham BS – all of whom have SVRs of 5.99pc.
Ms Bien added: "What you do next will depend on your lender. If it offers one of the cheaper SVRs you may be tempted to sit tight and rate until rates go up before remortgaging, as it is unlikely they will be able to significantly undercut this rate. In addition there will be no fees to pay, borrowers are not tied into any deal, and the amount of equity you have in your home is not an issue."
Ray Boulger, of John Charcol agreed. He said: "If makes sense for these borrowers to stay put rather than pay fees and get locked into mortgage deals. But for those on higher SVRs now could be a good time to pick up a good discounted deal."
Mr Morea points out that home owners should think about more than just the rate offered. They need to look at their own financial circumstances. "Those who know that they would struggle to repay their mortgage if interest rates increase significantly may want to consider a fixed rate, even if that means paying slightly more for this peace of mind in the short term."
No one has a crystal ball, but it is clear that interest rates can only go one way: upwards – although economists remain divided as to when rates will start to edge up, and how far they will go. But given many fixed rates are more than 5pc, many home owners are unwilling to pay significantly higher interest rates now on a hunch that rates will soon spiral.
Home owners also need to consider how much equity they have in their home. Those with less than 25 per cent will have a lot less choice, and the keenest rates are still primarily reserved for those with looking to borrow just 60pc or less of their property's value.
So what deals are available? Most borrowers agree that, in terms of rate, home owners can't beat HSBC's two-year discount deal, with a current pay rate of 1.99pc. Borrowers pay 1.95 percentage points below HSBC's main SVR. But this is only available to those on a 60pc loan-to-value, and it comes with a £1,199 fee. (Those with less equity can still get this deal, but the discount is narrower).
Other options include Woolwich's lifetime tracker. Here home owners' pay 2.47 percentage points above the Bank Rate (giving a current rate of 2.97pc) for the life of the mortgage. This also has an offset option, is available for loan up to 70pc of a property's value and comes with a £1,499 fee.
The best fixed-rate deal at the moment is from First Direct, charging 3.49pc for a two-year fix. Again this is only available to those with substantial equity (40pc) and comes with a hefty fee (£1,298).
Anyone thinking of remortgaging through should be aware of the potential pitfalls of some of these deals. The cheapest mortgages are invariably discounts now, as opposed to trackers. These follow the lenders' own SVR rather than the Bank Rate. This means there is no guarantee that rates will not move in line with the Bank Rate. HSBC, for example, has only cut its SVR by 2.31 points between October and March last year, despite the fact that the Bank Rate fell by 4.5 points.
Those who want a tracker, which guarantees to follow interest rates, should look at First Direct's tracker deal – paying 2.29 percentage points above Bank Rate for life. This gives a current pay rate of 2.79pc.
Lenders should also be wary of "overhanging" redemption penalties. The Woolwich deal, for example, recently launched a super-low tracker rate at 1.98pc for a year but there is a 2pc penalty to pay if borrowers want to move within two years.
Source
Borrowers lucky enough to have snapped up tracker deals with Halifax, Cheltenham & Gloucester (C&G) and Birmingham Midshires two years ago have been paying zero interest on their mortgage for the past six months.And many more home owners have been enjoying rates of less than 1pc – with Abbey, Alliance & Leicester, Intelligent Finance and Saffron Building Society all previously selling tracker deals that offered substantial discounts off the Bank Rate – which has stood at just 0.5pc since March.
But in the next few months tracker deals will all expire, causing a sharp increase in monthly mortgage payments for many families.
For example, those on a popular Halifax tracker – which charged a rate equivalent to 0.51 percentage points below the Bank Rate – have been paying just £544 a month since March, assuming they had a £150,000 mortgage. These families will now have to find an additional £250 a month when they are moved back onto Halifax's standard variable rate (SVR) which currently stands at 3.5pc. On a £150,000 mortgage this will mean mortgage repayments of £792 a month.
Melanie Bien, a director of independent mortgage broker Savills Private Finance said: "Many mortgage holders face a payment shock in the coming weeks and months, as they come to end of the super-cheap tracker rate."
Richard Morea of mortgage brokers London & Country added: "Many home owners have been paying next to no interest on their mortgage. But these deals will end very shortly. These borrowers need to look closely at their circumstances to decide whether they want to remortgage now or not."
But Mr Morea points out that not all of these deals will automatically revert to the bank's SVR. Many of these mortgages offered "lifetime tracker" options, which still look competitive today.
For example, those coming to the end of one of Alliance & Leicester two-year tracker deals will pay just 0.99 percentage points above the Bank Rate for the life of the mortgage – giving a pay rate today of just 1.49pc. This is significantly below A&L's SVR of 4.99pc and likely to be more competitive than any mortgage deal available on the high street.
Intelligent Finance, Saffron Building Society and other A&L tracker mortgages all offer similar options.
And remember, borrowers are automatically moved onto this rate. There is no arrangement fees or legal costs to pay, and there will be no penalties for switching at a later date.
In contrast most trackers offered by Halifax, Abbey and C&G move customers straight onto that bank's SVR.
Mr Morea adds: "It is imperative the home owners find out from their lenders what rate they will pay when their current deal ends, before they look at remortgaging." Given the generosity of many of these deals, lenders are probably not going out of their way to highlight what a good rate you'll have. So make sure you ask the right questions – and don't assume you will be automatically move onto the SVR.
Those that don't have the option of a "go to" rate should check what SVR will be charged.
At one end of the scale is C&G and Nationwide building society – both charging a competitive 2.5pc. Those moving to this rate are still going to see an increase in their monthly mortgage payments – but they are unlikely to find another mortgage deal significantly cheaper, in the short term at least.
However Abbey is charging 4.24pc while both Woolwich and A&L charge 4.99pc. But these look cheap when compared to the SVRs charged by many smaller building societies. According to Moneyfacts, the financial information group, at least 20 charge more than 5pc, with the most expensive being Stroud & Swindon, Newcastle and Nottingham BS – all of whom have SVRs of 5.99pc.
Ms Bien added: "What you do next will depend on your lender. If it offers one of the cheaper SVRs you may be tempted to sit tight and rate until rates go up before remortgaging, as it is unlikely they will be able to significantly undercut this rate. In addition there will be no fees to pay, borrowers are not tied into any deal, and the amount of equity you have in your home is not an issue."
Ray Boulger, of John Charcol agreed. He said: "If makes sense for these borrowers to stay put rather than pay fees and get locked into mortgage deals. But for those on higher SVRs now could be a good time to pick up a good discounted deal."
Mr Morea points out that home owners should think about more than just the rate offered. They need to look at their own financial circumstances. "Those who know that they would struggle to repay their mortgage if interest rates increase significantly may want to consider a fixed rate, even if that means paying slightly more for this peace of mind in the short term."
No one has a crystal ball, but it is clear that interest rates can only go one way: upwards – although economists remain divided as to when rates will start to edge up, and how far they will go. But given many fixed rates are more than 5pc, many home owners are unwilling to pay significantly higher interest rates now on a hunch that rates will soon spiral.
Home owners also need to consider how much equity they have in their home. Those with less than 25 per cent will have a lot less choice, and the keenest rates are still primarily reserved for those with looking to borrow just 60pc or less of their property's value.
So what deals are available? Most borrowers agree that, in terms of rate, home owners can't beat HSBC's two-year discount deal, with a current pay rate of 1.99pc. Borrowers pay 1.95 percentage points below HSBC's main SVR. But this is only available to those on a 60pc loan-to-value, and it comes with a £1,199 fee. (Those with less equity can still get this deal, but the discount is narrower).
Other options include Woolwich's lifetime tracker. Here home owners' pay 2.47 percentage points above the Bank Rate (giving a current rate of 2.97pc) for the life of the mortgage. This also has an offset option, is available for loan up to 70pc of a property's value and comes with a £1,499 fee.
The best fixed-rate deal at the moment is from First Direct, charging 3.49pc for a two-year fix. Again this is only available to those with substantial equity (40pc) and comes with a hefty fee (£1,298).
Anyone thinking of remortgaging through should be aware of the potential pitfalls of some of these deals. The cheapest mortgages are invariably discounts now, as opposed to trackers. These follow the lenders' own SVR rather than the Bank Rate. This means there is no guarantee that rates will not move in line with the Bank Rate. HSBC, for example, has only cut its SVR by 2.31 points between October and March last year, despite the fact that the Bank Rate fell by 4.5 points.
Those who want a tracker, which guarantees to follow interest rates, should look at First Direct's tracker deal – paying 2.29 percentage points above Bank Rate for life. This gives a current pay rate of 2.79pc.
Lenders should also be wary of "overhanging" redemption penalties. The Woolwich deal, for example, recently launched a super-low tracker rate at 1.98pc for a year but there is a 2pc penalty to pay if borrowers want to move within two years.
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