Those on tracker rate mortgages will see their interest rates go up automatically in line with the latest interest rate hike
In June, the Bank of England (BoE) increased the Base Rate to 1.25 percent, a rate not seen for more than 13 years, which has meant that mortgages have also risen significantly.
Alice Haine, a personal finance analyst from Bestinvest said people could possibly shave hundreds of pounds off their mortgage as it comes up to renew if they shop around. Ms Haine said that most homeowners are on a fixed rate deal so they won’t feel the pain for now.
Those on tracker rate mortgages will see their interest rates go up automatically in line with the latest interest rate hike.
However, Ms Haine said that if people do not renew their fixed rate deal when it expires, the lender will switch them onto their Standard Variable Rate (SVR).
This will often be ‘much higher’ than the lender’s introductory rate.
Lenders usually set their own rates in line with the Bank of England’s interest rate.
Moneyfacts.co.uk reported that the average Standard Variable Rate increased from 4.40 percent in December 2021 to 4.91 percent in June 2022.
A fixed deal allows Britons to lock in their rate for a period of time – often two to sometimes 10 years.
This means that the interest rate remains the same throughout the period of the contract.
According to data from the Bank of England, 83.1 percent of existing mortgage holders are on fixed-rate contracts.
However, as many as 32.7 percent of this group are on short agreements of 24 months or less.
Ms Haine highlighted that one online mortgage broker called Trussle claims its users can still make savings of up to £290 ($346.01) a month, particularly by switching someone from a Standard Variable Rate rate to a fixed deal.
Ms Haine said that people could also end up saving £500 ($596.57) on the brokerage fee as the online tool is free to use and ‘scours thousands of deals’ across the internet.
This also includes exclusive deals that a user might not find by going direct to a lender.
She said: This level of saving depends on the rate you are on now, how much equity you have in the property and a whole host of other factors, such as your income and spending behaviour.
Scouring the comparison sites for the best deals can also pay off – so do your homework and lock in a new offer now! Particularly if your fixed period is expiring soon, as you can secure a new product up to six months before your existing deal expires, she said.