How much would your mortgage rate increase if you were to fix now?

How bad would the foreclosure crisis be for you? As rates rise rapidly SIMON LAMBERT by checking the cost if you were to fix it now

How bad would the foreclosure crisis be for you?

The rapid increase in the Bank of England base rate since December has exceeded expectations and I am increasingly having conversations with people who have also been surprised with their mortgages.

The Bank is widely expected to raise rates again today, from 1 percent to 1.25 percent, and is forecast to rise further.

A generation of borrowers is facing a sudden reversal of the situation where, typically, when they move or remortgage, their rate drops.

Crashing the low rate party: Mortgage rates have risen rapidly in recent months and borrowers are finding that they are now paying more to remortgage

Instead, many who reach the end of two- or even five-year arrangements find that they now have to pay a higher interest rate to switch to a new agreement, and even if they don’t borrow more, their monthly payments are increasing.

At first, when new mortgage rates started to rise on their own, this effect was not as pronounced.

But mortgage rate increases have turned around in recent months, and we’re a long way from the best deals offered last fall, before the base rate began rising from 0.1 percent.

Research from This is Money partner, mortgage broker L&C, revealed this week that the cheapest typical two-year fix from a basket of ten big lenders has more than tripled from 0.89 percent in October 2021 to 2 .71 percent now.

The typical cheapest five-year offer has risen from 1.05% in October to 2.78% now.

As a sign of how fast rates are rising, in just one month, the two-year top fix increased 0.35 percentage points and the five-year fix increased 0.32 percentage points.

It’s worth noting that this is an average taken from the most attractive deals on offer, the ones available to homeowners who typically have at least 40 percent equity in their homes (also known as 60 percent loan to worth).

Mortgage rates for those with smaller deposits or principal are higher.

On the other hand, the good news for those who qualify is that it’s possible to slightly beat this average measure: The best five-year fix at 60 percent loan-to-value is from TSB at 2.54 percent, while the best two fix YoY is 2.34 percent.

The message remains the same, though: Mortgage rates have gone way up, and if your solution runs out this year, act now.

With many lenders, it’s possible to close on a new fixed-rate offer up to six months in advance, and often the trick of adding the origination fee to the loan means there’s no up-front cost to do so.

If you do this, the fee is only charged when you take out the mortgage, and if you pay it back later, you won’t incur interest on that additional amount for the next two decades.

Going back to my original question: how bad would the foreclosure crisis be for you?

If you were to remortgage now, how much more would you end up paying?

Among other things, the answer depends on the size of your mortgage, when you got your most recent fix (this factors into the rate gap then and now), and how much your home has increased in value (this could bring you down to a lower LTV bracket). cheap).

You can check the best mortgage rates you could ask for in different fixed rate terms with our mortgage search calculator, powered by L&C.

The answer for many risks being an unpleasant surprise. (You’d need to find another £300 per month, for example.)

But forewarned is forewarned and the worst thing you can do is bury your head in the sand. It’s best to know ahead of time how much more you might end up paying and to plan ahead.

And don’t forget to factor in when you’re calculating that you should have paid off part of your existing mortgage since you took it out.

Read our guide on how to remortgage and find the best rate to find out what you need to know.

P.S. As a last comment, it doesn’t show up in the numbers yet, but this will surely put a dent in the rampant house price inflation we have seen in the pandemic. I moved house in July 2020, fixing for five years at 1.4 percent, the best rate for the same amount now would be 2.69 percent.

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