Protect yourself NOW as mortgage rates soar – ‘10-year fix already saving me a fortune’

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The Bank of England is likely to become the first major central bank to lift interest rates since the start of the pandemic, said Victoria Scholar, head of investment at Interactive Investor. “It may raise them from 0.1 percent to 0.25 percent on Thursday 4 November. Get ready for it.”

Mortgage rates have seen a “sudden jump” in the last week and deals charging less than one per cent have almost disappeared, according to new research from Defaqto.

Last Monday, 82 mortgages charged less than one per cent, but that has now fallen to just 22 and the numbers continue to shrink.

Two-year fixes at 80 per cent LTV have “soared” by a quarter in days, from 1.24 per cent to 1.64 per cent, said Katie Brain, consumer banking expert at Defaqto.

This is bad news for borrowers after years of record low rates but she added: “Interest rates are still low and there are some great deals to be had.”

Mortgage brokers are urging borrowers to lock into fixed-rate mortgages to protect themselves as inflation drives borrowing costs higher.

Barclays, HSBC, NatWest and TSB are just some of the lenders to increase mortgage rates in anticipation of a base rate hike and the typical borrower could pay almost £400 a year more as a result.

First-time buyer Tara Clee, 25, is keen to buy a house in Bristol with boyfriend George Irwin, 27, but also wary. “If mortgage rates do rise, finding an affordable property is going to get even more expensive than it already is.”

Higher borrowing costs may curb house price growth but Tara said: “It feels like a real gamble either way.”

If they do buy, Tara and George would opt for a five-year fixed rate mortgage. “We want that added protection, as it will make budgeting a lot easier.”

READ MORE: Interest rates to rise this week: What it means for YOU and your money

First-time buyer James Jackson-Ellis is protected against mortgage rate hikes for a full decade after locking into a 10-year fixed rate.

 James has just bought a two-bed terrace in the Wirral and reckons now is the ideal time to fix before mortgage rates surge.

Public sector worker James, 29, chose a 10-year fixed rate with Nationwide building society charging just 2.89 percent, after taking advice from broker Habito, and reckons he is already saving money.

“The interest rate on an identical mortgage has already shot past 3.54 percent. So I’m really confident I will make big savings over the next decade.”

Fixing for 10 years means James does not worry have to bother remortgaging every two or three years, saving yet more money.

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Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said there are still top mortgage deals to be had but act fast. “The only way is up for mortgages, so it’s worth remortgaging sooner rather than later.”

Homeowners who have already locked into fixed-rate mortgages may pay early redemption charges if they switch early. “However, if your deal ends within the next six months, start applying for a new mortgage now to secure a cheap deal for when your current one expires.”

Banks have drawn criticism for hiking mortgage rates while refusing to pay more on savings and Coles said: “Most people continue to get just 0.01 per cent in a typical high street account, with little hope of any improvement.”