According to mortgage advisor L&C, people looking to remortgage their homes are expected to pay, on average, an additional £800 each year when compared to just five months ago.
The analysis was based on several parameters, using the example of a homeowner who had 40% equity in their property and was looking to take on a 2-year fixed-rate mortgage over a 25-year period on a mortgage of £150,000.
Figures provided by the Bank of England showed that applications for remortgage products rose in the last quarter of 2021 in proportion to overall lending. Market experts indicated that homeowners remortgaging the properties were hoping to grab a good deal before interest rates rose further, as they are predicted to do in the coming months.
Interest rates from major lenders were used by L&C, which were averaged out to create the analytic report.
The data showed that in October 2021, with interest rates at an all-time low, borrowers would be paying a little more than £557 per month on a 2-year fixed-rate mortgage deal.
If the same homeowner were to remortgage now, they could expect to pay around £627 per month, which will equate to an extra £70 monthly, which is approximately an additional £840 per year.
In some instances, good mortgage deals are only made available to borrowers for a very short period of time, often just days, and are then removed from the market. What homeowners need to realise is that they can apply for a new mortgage up to six months prior to the end of their current mortgage arrangement.
L&C also stressed that offers from lenders are typically valid for 3 to 6 months, giving the borrowers “Rates are moving quickly, though, and deals rapidly come and go, often only lasting a matter of days before being replaced with higher rates. Sufficient time to make an application despite the fact that an ERC (early replacement charge) may stay in place for several months.
Associate director at L&C Mortgages, David Hollingworth, commented: “Mortgage rates have been shifting rapidly as lenders are forced to adapt to the impact of market expectations of higher rates on their funding costs.
“The sheer pace of change is something that could take borrowers by surprise, especially when the cost of living and other outgoings such as energy are already rising too.
“Fixed rates are still at historically attractive levels, so borrowers should review their current deal to make sure that they are on the best deal and protecting their position, especially against a backdrop of rocketing outgoings and further potential increases in the base rate.
“Borrowers can lock in at a current rate up to six months ahead, giving them the chance to review well ahead and ensure a smooth switchover when their current deal ends. That could help them get ahead of any further rate rises.”