Home owners in the UK should think twice before incurring early exit charges in a dash to secure a cheap fixed rate mortgage following the rise in the Bank of England base rate, according to a new analysis.
Indeed, the report from Royal London shows that some providers have held or even cut rates following last week’s interest rate hike and changing now may not be in the best interests of everyone.
While not every bank publishes their historic mortgage borrowing costs, Royal London analysed the fixed interest rates offered to new borrowers by HSBC and Nationwide on Friday 13 October 2017. This was compared to the new rates these lenders published three weeks later on Friday 03 November 2017 following the Bank’s announcement.
The analysis showed that despite updating its borrowing costs on tracker mortgages and standard variable rate, the cost of borrowing at a fixed rate with HSBC for two, three and five years at 60%, 70%, 75%, 80% and 90% loan to value had not changed.
Nationwide’s new range of products offering mortgage borrowing at a fixed rate for 10 years had actually fallen by between 0.30% and 0.45%, while for a range of other fixed rate mortgage products the cost of borrowing either stayed the same or fell by up to 0.15%.
‘It was widely expected that the interest rate hike would increase the cost of mortgage borrowing and while this is certainly the case for tracker mortgages, the analysis shows that some banks have not chosen to hike their fixed rate rates as yet,’ said Helen Morrissey, personal finance specialist at Royal London.
‘The Bank of England’s announcement should calm people’s nerves as low interest rates look like they are here to stay for some time yet and so borrowers should think carefully before incurring early exit penalties in a bid to secure a quick deal. Borrowers should take the time to do their research or seek advice where necessary,’ she added.
