Homeowners can lock in mortgage rates for longer as banks become more lenient

Banks and building societies are offering to guarantee mortgage rates for an unprecedented nine months to help borrowers avoid ruinously high repayments next year.

Normally homeowners are able to lock into a fixed-term mortgage rate around three months before the existing deal expires, so long as they stay with their lender.

But major lenders including Barclays, First Direct, HSBC and NatWest are letting customers begin a “product transfer” between four and six months before their current deal comes up for renewal.

Simon Gammon of Knight Frank said Nationwide was offering the most generous window – “they give you up to three months in which to get the mortgage offer approved and then you have six months to use it”, he said.

In effect this guarantees the rate for nine months.

By getting a new deal now, borrowers could stand to save hundreds if not thousands of pounds.

“Locking in now could save you 0.3 percentage points. That may not sound like much, but for a five-year fixed rate that’s 1.5 percentage points of your mortgage saved,” Mr Gammon said.

However, he said the onus was on borrowers to be proactive and check when their deal is expiring, then ask their lender if there was an opportunity to lock in rates earlier.

Homeowners are racing to lock in today’s fixed-rate deals amid fears of an imminent rate rise by the Bank of England

Property experts believe an emergency increase to the interest rate is “almost guaranteed” after Chancellor Kwasi Kwarteng’s shock tax cuts caused the pound to plummet to record lows.

Mark Dyason of Edinburgh Mortgage Advice, a broker, said: “By cutting stamp duty, the Chancellor has spooked property markets to such an extent that, for homeowners, the savings from the tax cut will not offset the amount their mortgage is going to go up by.”

If mortgage rates rise to 4pc next year, someone coming to the end of a fixed-rate deal with a £250,000 mortgage on a 25-year term could be paying £250 more a month next year, according to Mr Dyason – an annual increase of £3,000.

But if the Bank of England raises rates by 0.75 percentage points this week – which many believe it will – mortgage rates could exceed 6pc in 2023 and the same borrower would be paying £1,611 a month, meaning their mortgage would be 50pc more expensive.

Almost two million homeowners are on a fixed-rate deal that will expire next year, according to UK Finance.

Some of them may be able to lessen the blow by locking in today’s rate for next year’s deal.

Many homeowners for whom this is not an option are considering paying the early repayment charge to remortgage.

Mr Dyason said for many this would not be cost-effective, but that could be about to change: “If the Bank Rate goes up this week, remortgaging early and paying the early repayment charge could be worth looking at,” he said.