Is this your last chance to grab a cheap mortgage? (2024)

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Homeowners face a race to lock into a cheap mortgage after the Bank of England warned the era of low rates is ending.

Mortgage rates have been at a record low since official interest rates were slashed to 0.25 per cent last summer.

But last week Mark Carney, Governor of the Bank, signalled that the base rate could rise to 0.5 per cent by next summer before reaching 1 per cent or higher by mid-2020.

A hike could mean a sudden increase in monthly repayments for millions of homeowners on variable rate mortgages.

In September and October, more than £35billion of fixed home loan deals will move on to variable deals — the largest amount since 2012, according to the CACI Mortgage Market Database.

Now experts warn that super-cheap mortgages could disappear, so you’ll need to act fast.

David Hollingworth, of broker L&C Mortgages, says: ‘Borrowers should be aware mortgage rates will begin to climb before the Bank of England moves rates, so they need to lock in before that happens.’

If you’re one of the three million homeowners sitting on a standard variable rate (SVR) — the default rate you are moved to when your fixed rate ends — you could save hundreds of pounds a month by fixing.

The average SVR is 4.6 per cent, which costs £842 a month on a £150,000 mortgage. By comparison, Yorkshire Building Society currently has a two-year fix at 0.99 per cent, costing £565 a month — a £277 saving.

Two-year deals typically offer the cheapest rates on the market and are good for those who know they might have to move in the near future.

However, by taking out a two-year deal you run the risk of having to remortgage at the same time Britain officially leaves the European Union.

Experts say the uncertainty surrounding Brexit may cause mortgage rates to rise, which is why an increasing number of people are opting for a five-year deal.

While they are a little more expensive than two-year deals, five-year fixes are still competitive.

The cheapest five-year deal currently on offer is HSBC’s 1.59 per cent deal for borrowers with a 40 per cent deposit.

On a typical £150,000 mortgage your monthly repayments work out at £606 — £41 more than Yorkshire BS’s top 0.99 per cent two-year fixed rate. The total five-year cost including a £999 fee is £37,375.

If you know you will not be moving house within the next decade it may be well worth considering a ten-year fix.

First Direct has a 2.49 per cent deal with no fee. This is £672 a month — just £66 more a month than the cheapest five-year deal.

However, these deals can be inflexible and have hefty early repayment charges.

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