Interest rates: Martin Lewis on affect on mortgage applicants
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Many people will soon be coming to the end of fixed mortgage arrangements, but soaring interest rates could make this difficult to bear. Homeowners whose fixed deals are due to expire in the next year face the prospect of doubling their costs every month with rising interest.
However, many have been able to renegotiate their deals early due to substantial exit fees.
Mum-of-two Lydia Joseph, 43, is a researcher who is worried about her mortgage payments.
She is currently paying £1,718 per month on a 28 year mortgage she and her husband Paul have on their home in Faversham, Kent.
The couple bought their property for £485,000 back in 2020, and their three year deal is set to end in April 2023.
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But the working mum is terrified about what this could mean for her outgoings.
She told nous.co: “I can’t sleep at night worrying how I will pay the mortgage when my fixed deal ends next year. The repayments then are likely to rise to more than half my take-home pay – or even more if interest rates go through the roof.
“I could get out of my current deal and lock into a new one now that I can afford, but my current lenders are demanding £12,000 for me to switch.
“I feel I and many thousands like me are being held hostage by the banks.”
Ms Joseph explained she could get a seven-year fixed deal at present for 2.7 percent.
However, there is no way to extricate herself from the current arrangement without shelling out thousands of pounds in fees.
She added: “That would wipe out all our savings overnight. The whole thing feels like I’m facing down the barrel of a gun.
“But if I don’t forfeit £12k now, my monthly mortgage payments next year could be more than half my household take-home pay. That’s before bills, groceries, petrol – anything. Which is absolutely insane.
“In the meantime, we’ve cut back on anything we weren’t already committed to and now track all our spending obsessively.
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“I earn a higher than average wage but we don’t live in a mansion, just a four-bed new-build on an estate. I am losing sleep over the worry of this, so heaven knows how others less fortunate are coping.”
Ms Joseph has expressed her belief that it is “unfair” for banks to hold customers to exit fees given the cost of living crisis.
She has urged provides to reconsider the idea to let people out of existing arrangements and into new ones.
The issue is set to be compounded as the Bank of England is expected to raise its base rate today.
Some experts even predict mortgage interest rates will rise to as much as seven percent in the next two years.
Greg Marsh, CEO and founder of nous.co said: “This is a ticking time bomb for hundreds of thousands of families in the UK.
“It goes to show how even the most prudent of people can get into difficulty when hit by an unexpected financial crisis like the one we are facing now.
“Let’s face it, this situation has not really come up in the past two decades because we’ve had falling or very low interest rates.
“It is vital for everyone to be on top of their outgoings in these difficult times.”
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