Martin Lewis has urged everyone in the UK with a mortgage to draw a 'big red line' in their diary or risk paying more than they need to. The money-saving expert was giving advice on This Morning about how to ensure they were on the lowest mortgage rate.
The value of all remortgages in the UK is expected to hit £110 billion in 2027, up from £103 billion this year. With interest rates expected to go up in an attempt to bring down ongoing high inflation, making sure you are on the best deal could save a lot of money.
Six-month rule for locking in rates
Lewis urged people to speak to a mortgage broker six months before the end of their mortgage to ensure they lock in the best rate available. At the very least, it can serve as an insurance policy should rates come down in the following months.
"If your mortgage deal is ending, six months from the date it ends is the time you need to start acting. And that's the time I'd be going to a mortgage broker - and this is the reason why," he said.
"You can book, usually, a fixed rate up to six months in advance, which means you can get a new rate to start the day your existing mortgage ends. You can book it in. Yeah. But if rates were to improve meantime, you would be able to get rid of it and get a new fixed rate that was cheaper. If rates get worse meantime, brilliant. It's an insurance policy that you're locked in."
Current rate picture
With the UK base rate sitting currently at 3.75 per cent, Rightmove estimates that the average two-year fixed rate is currently coming in at 5.5 per cent - up from 4.25 per cent before hostilities between the US and Israel against Iran began. The average five-year fixed is sitting at 5.48 per cent.
"There's stability for now as the Bank of England holds its Base Rate as widely expected. We've seen average mortgage rates increase over the last few weeks as geopolitical tensions have escalated," said Rightmove property expert Colleen Babcock.
"For broader context, (the current two-year rate) is up from 4.25 per cent before the war in Iran started, but down from around 5.43 per cent at the peak of tensions in April. For home-movers, rates remain elevated which continues to stretch affordability. However, while rates are high, they're also relatively steady, which helps movers to plan and make decisions.
"Even relatively small changes in mortgage rates can have a noticeable impact on monthly repayments, particularly for first-time buyers, so any downwards movement in rates during the second half of this year would be very welcome."
Act now to lock in security
Lewis urged people to act now. Even if hostilities in the Middle East do end, it will still take some time for that to feed through to inflation rates, meaning hikes in the Bank of England base rate are still likely.
"So people who leave it to two or three months before, especially in an upward environment as we have now, remember it's predicted four base rate rises. That's what the markets are suggesting over the next year," he said.
"The sooner you go and do this the sooner you lock in the security of a fix you need to do it in a way that you're able to get out of it. Talk to your mortgage broker about that, they'll be able to advise you on all of that that's what you should be doing right now and there are well over a million people out there who are in that position."
"Six months in your diary, (put a) big red line or computerised line all over it saying sort, 'my mortgage today'. The longer you leave it, especially in this environment with the base rate rise predicted in November, the riskier it gets."
