Hundreds of 1,000 homeowners were urged to ditch variable rate mortgages yesterday after lenders raised interest rates to 25 years.
About 773,000 mortgage holders currently have normal variable rate (SVR), the interest rate charged to borrowers as soon as the first deal closes.
But experts warn that debtors should refuse these offers, otherwise there is a risk of overpaying, as interest rates will rise in the coming months.
The rates are purely technical, says Jeremy Leff, a North London estate agent and former president of the Royal Institution of Surveyors.
He mentioned: “Many homeowners have opted for standard variable rates in the hope that interest rates will come down sooner rather than later.
“But interest rates will remain high for longer, so homeowners need to rethink their options now.”
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The warning comes after the Bank of England voted to raise interest rates to 15 years above 5% for the thirteenth time in a row since December 2021.
According to price tracker Moneyfactscompare, overall SVR has risen to 7.52% overnight. Eighteen months earlier, however, it was 4.4%.
Meanwhile, the standard two-year premium settlement is currently 6.19%, while the five-year interest rate is now 5.83%.
The difference in normal variable charges has already added £389 per 30 days, or £4,668 a year, to the payments of a home owner with a £200,000 SVR mortgage, according to mortgage distributor L&C. Owners can count on much more trouble, with experts predicting the bottom price will reach 6 per cent by the end of the year, adding another £204 a month to that family’s payments.
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A number of lenders have already raised their standard variable rate, including Halifax, which may raise it from 7.99% to 8.49% at the start of August.
The last time the lender’s SVR was so excessive was in November 1998, when it extended residential loans to borrowers at an 8.7% fee.
But just 18 months ago it was providing borrowers with a price of three.49%. Barclays has additionally introduced that it would increase its price to 8.49% after the resolution of the Bank of England.
Meanwhile, Santander is offering a new outlook at a price of 5.25% from early August.
David Hollingworth, of dealer L&C, said: “Many people fell for simple variable charges when the market was uncertain, but now they may have overpaid significantly.
“While rates are rising, borrowers should consider fixed or tracker rates as they will still be much cheaper than standard variable deals.”