Martin Lewis urges people to check new mortgage support that could save them money
With mortgage rates in the UK hitting a 15-year high of 6.6%, many homeowners whose deals are due to expire will have some difficult decisions to make.
They may go up even further in the near-future – perhaps beyond 7% –with some traders betting on the Bank of England raising the cost of borrowing to a 25-year high early next year.
With so much uncertainty, it may be tempting to opt for a variable deal in the hope that interest rates start to come down again, but Moneysavingexpert.com founder Martin Lewis warns this can be "dangerous" trap.
Speaking to ITV's Good Morning Britain, the personal finance guru pointed out that since around 2007, there has been a period of "super-low" interest rates that has been a historical "anomaly".
“Where rates are now is the normal, that’s what we had had, roughly for the prior 300 years. We’ve now had a 15-year anomaly, so there is no guarantee that interest rates will drop down to those super-low levels... There’s no 'when', it is only an 'if'.”
Read more: Mortgage rates could climb even further after hitting 15-year high today
With interest rates having risen significantly as part of the Bank of England's attempts to tackle inflation, a new "mortgage charter" has been brought in to help homeowners worrying about having to pay more.
Most of its terms don't come into force until August, but one particular feature came into effect on Monday that could save mortgage holders a lot of money, Lewis pointed out on the show.
Here's how it works.
Borrowers can ‘lock in’ new deal six months before renewal date
As of Tuesday, mortgage holders approaching the end of a fixed rate deal will now have the chance to lock in a new deal up to six months ahead.
They will also be able to manage their new deal and request a better like-for-like deal with their lender right up until their new term starts – if one is available.
This essentially means the borrower can hedge their bets. If interest rates go up over that six-month period, then borrowers who've locked in from the start will be paying a lower rate than otherwise.
Read more: Cost of living: Around three-quarters of eligible households missed out on energy bill support
If rates drop, then they are free to ditch the deal they've locked in and instead opt for something better. Lewis advises viewers to double check, but says that there usually aren't any fees involved for this process.
“You want to be looking ahead and at least banking yourself a product transfer now with the cheapest rate possible, which you can get rid of if you change your mind later, just in case things get worse," he added.
In even better news for borrowers, approximately 90% of the mortgage market has signed up to the charter.
What else is in the charter?
From 26 June, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.
A new deal between lenders, the FCA and the government permitting customers who are up to date with their payments to either switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments. Customers will also have the option to revert to their original term within six months by contacting their lender.
Lenders who have signed up to the charter
Aldermore Bank
Bank of Ireland UK
Barclays
Bath Building Society
Buckinghamshire Building Society
The Co-operative Bank, including Platform and Britannia
Coventry Building Society
Danske Bank
Darlington Building Society
Earl Shilton Building Society
Ecology Building Society
Family Building Society
Furness Building Society
Glasgow Credit Union
Hinckley & Rugby Building Society
HSBC, including First Direct
Kensington Mortgage Company
Leeds Building Society
Leek Building Society
Lloyds, including Halifax and Scottish Widows
Loughborough Building Society
Melton Mowbray Building Society
Metro Bank
Monmouthshire Building Society
Nationwide Building Society
Natwest, including RBS and Ulster Bank
Newbury Building Society
Newcastle Building Society
Nottingham Building Society
Principality Building Society
Progressive Building Society
Santander
Scottish Building Society
Skipton Building Society
Suffolk Building Society
Teachers Building Society
Tipton & Coseley Building Society
TSB, including Whistletree
The Vernon Building Society
United Trust Bank Limited
Virgin Money, including Clydesdale Bank and Yorkshire Bank
West Bromwich Building Society
Yorkshire Building Society
Watch: Money Saving Expert founder Martin Lewis warns of a 'frightening' AI-generated scam