the times | Saturday April 30 2022 57
Money
borrowers on variable and tracker deals
that are linked to the base rate.
Aaron Strutt from the mortgage bro-
ker Trinity Financial said: “Borrowers
will be even more concerned about
rates going up when they see the chan-
cellor’s comments. Many have signed
up for large mortgages to get the prop-
erties they want, often taking on debt of
5.5 times their salary at a time when
rates were at rock bottom.”
There has been a rush to remortgage
this year as homeowners seek to lock in
low rates before they start to climb. You
can usually secure a new deal up to six
months before yours expires.
Nearly 95,000 remortgages were ap-
proved in the first two months of this
year, according to the Bank of England.
The 48,210 approved in February was
the highest monthly total for two years.
Deals are being pulled from the
market at very short notice and mort-
gage brokers have reported working
long hours and submitting applications
late at night as they try to grab deals for
clients before they disappear. They ex-
pect more business next Thursday.Halifax is putting up its remortgage
rates by up to 0.4 percentage points on
Tuesday.
David Hollingworth from the mort-
gage broker L&C said: “Every time the
base rate decision happens we see activ-
ity around that, so our focus is very
much on Thursday.
“People are aware of rising costs,
they’re aware that rates are on the rise,
and our phone traffic is going up steadi-
ly, with particular bumps at base rate
decision times.”
If you have a fixed rate ending this
year you should start looking around
now. There is almost no chance that
mortgage rates will fall again this year,
and because of the pace at which they
are rising it is best to act as soon as
possible. However, you should consider
paying an early repayment charge to
get out of a deal only when you know
for sure that you will make that charge
back from lower repayments on the
new one.
What you do next depends on your
future plans. Over the past five years
the five-year fix has become Britain’sfavourite remortgage. Many lenders
now offer five-year deals cheaper than
their two-year ones, so they are defi-
nitely worth considering.
If you do not think you are likely to
move soon or if you want to move
somewhere that would not require a
larger mortgage, a five-year fix is prob-
ably your best option to protect you
from rising rates over the next few years
as the economy, hopefully, gets back on
track.
Even longer deals are now attractive-
ly priced.
Strutt said: “Lots of people are wor-
ried about rates going up so they have
been locking into longer-term fixes. If
you are looking for payment security
there are some great deals. Barclays has
a 2.26 per cent seven-year fix that is
cheaper than the bank’s five-year fix.
“If you are reasonably sure you will
stay in your property for the foreseea-
ble future then it makes sense to lock
into a longer-term fix, but make sure
you understand how much it will cost to
get out of the loan.”
You should check with a lender
before you apply about whether it
would waive an early repayment
charge if your circumstances changed,
for example if you get divorced or lose
your job.
Fixing for a long time might also not
be a good idea for those with smaller
deposits who cannot get the cheapest
loans but who, as their property in-
creases in value over time, could be eli-
gible for cheaper deals at a lower LTV.
If you’re on a tracker deal and not in
the middle of moving or close to paying
off your loan then it is worth looking at
fixing. Otherwise your payments will
get steadily more expensive in the next
few months — and possibly years.Mortgage rates
Maximum 60% loan-to-value 2 Year fixed 5 Year fixedJan
2020Apr Jul Oct Jan
2021Apr Jul Oct Jan
2022Apr1.41.61.82.02.22.42.6%Source: MoneyfactsFollow us on twitter @timesmoney | @jimconey | @jessiehewitson | @davidbyers26 | @AlihussainST | @katjdenham | @davidbrenchley | @imogent_ | @George_Nixon97It’s mortgage crunch time
There is only one way that rates are heading, and it is not down. It’s time to fix a new deal now, if you can, says George Nixon
D
ebra Bloom earns
more than
£150,000 a year
as a buying director for
a fashion retailer (David
Byers writes). So it was a
surprise when she
received a letter from
the Department for
Work and Pensions
(DWP) on January 31
telling her she had
wrongly claimed £1,600
in benefits, which would
be taken from her wage
packet.
Bloom, 55, who lives
in Hertfordshire, had
become one of the many
victims of identity fraud
caught out during the
pandemic when the
DWP relaxed checks so
that benefits could be
distributed morequickly. It allowed
identity checks to be
processed online rather
than face to face and
took some information
on trust, including the
cost of an applicant’s
rent and their salary.
The department
estimates that
£8.4 billion was lost to
fraud and error on
universal credit
payments in 2020-21,
compared with
£4.6 billion lost the year
before.
It took Bloom five
calls to get through to
the DWP’s helpline and
after waiting on hold for
more than two hours,
she was told the matter
was being resolved.
She instructed hercompany to block the
DWP’s deductions from
her pay.
However, on February
8 she had another letter
from DWP Debt
Management, telling
her: “We may ask a debt
collection agency to
collect this money on
our behalf.”
Bloom wrote back to
explain but nearly three
months later her case
still isn’t settled. She
describes the experience
as “an absolute
shambles, both stressful
and upsetting”.
After The Times
contacted the DWP, it
said: “The repayment
has been cancelled
because it appears to be
a case of stolen ID.”
Bloom, however, said
the department had not
contacted her. “I am
very happy and relieved
to hear that the case has
been cancelled, but they
haven’t written to
inform me, which surely
is a basic courtesy.”‘I earn £150k, but
the DWP thinks
I’m a benefit cheat’
I was threatenedwith debt collectors.
It has been an
absolute shambles
A
record £328 billion worth
of fixed-rate mortgages
will come to an end this
year, leaving homeowners
facing big rises in their
repayments.
It has been years since anyone with
plenty of equity in their home has had
to pay more when getting a new deal
because interest rates had been on a
downward slide since 2008.
But, amid a backdrop of soaring infla-
tion, mortgage rates have been
rising since the end of last
year. The Bank of England
base rate, having been
below 1 per cent since
March 2009, has gone
up three times since
December and is now
0.75 per cent. The
chancellor, Rishi Sun-
ak, warns that there
could be seven more
rises to take it to 2.5 per
cent by the end of the year.
Last October the average
two-year fixed-rate available
to borrowers with 60 per
cent loan-to-value (LTV)
in their homes was
1.43 per cent, according
to the data company
Moneyfacts, and the
average five-year
fixed rate was 1.65 per
cent.
At the start of this
month the average two-
year fix was 2.35 per cent
and the average five-year fix
was 2.46 per cent.
Those coming to the end of a five-
year fix will struggle to get a deal as
good as their last one. In April 2017 the
lowest five-year fixed rate at 60 per cent
LTV was 1.7 per cent from Barclays, ac-
cording to Moneyfacts. Now it is 2.11 per
cent from Cumberland Building
Society. This works out at an extra £476
a year on a £200,000 loan.
It’s even worse for borrowers about to
hit the end of a short deal.
In April 2020 the lowest two-year
fixed rate was 1.14 per cent from Leeds
Building Society. It is now 2.18 per cent
from Cumberland Building Society —
higher than the lowest five-year
fix. That would add £1,186 a
year to a £200,000 mort-
gage.
Rates were down as
low as 1.09 per cent by
the end of 2020, so
anyone coming off a
two-year deal in
December is in for a
bigger shock.
First-time buyer
loans have not gone up
much yet, with the average
two-year fixed rate at 95 per
cent up from 3.06 per cent in
January to 3.19 per cent this
month.
The base rate could
go up again as soon as
next week when the
Bank of England’s
Monetary Policy
Committee meets to
try to tame inflation,
which hit a 30-year
high of 7 per cent in the
12 months to March.
If the base rate does rise to
2.5 per cent this year it would be
the highest level since November 2008.
This would have an immediate im-
pact for the 1.87 million mortgage2.35%
the average two-
year fixed rate on
April 11.43%
the average
two-year fixed rate
in OctoberMy boss owes me
a tenner. Why
can’t I ask for it?
Jessie Hewitson,
Page 58