- 02
- Aug
Homeowners considering taking out a fixed-rate mortgage deal are being advised to take the time to check the full terms and conditions of the product.
The warning comes as research carried out by MoneyExpert.com reveals that those wishing to opt of out such a secured loan offer will have to pay an average of £6,370, a figure which could well impact upon many consumers’ day-to-day finances. According to the company, a rising number of borrowers are opting for fixed-rate deals as they continue to struggle to manage with the effect of five base rate rises over the last 12 months, despite the Bank of England choosing to keep interest rates at 5.75 per cent earlier today. However, Britons are said to be liable to face “massive early redemption charges” should they decide to change their mind.
Those choosing to leave during the first year of their contract incur an average fee of £6,631, with consumers opting out at the second and third years facing charges of £6,225 and £6,254 respectively. MoneyExpert.com also pointed out that redemption fees can vary enormously as lenders may choose to charge a percentage of a customer’s total loan or an agreed number of monthly repayments.
Sean Gardner, chief executive for the financial services firm, said: “Homeowners have been told to fix their mortgage deals since last summer as interest rates continue to rise and lenders have obviously been keen to capitalise on this. Choosing a fixed-rate mortgage is a long-term commitment and a binding contract - so lenders are well within their rights to charge you if you want out. The key thing is to make sure you read the small print when signing up to a fixed deal.”
As a result, Mr Gardner claimed that homeowners should look to become as aware as possible about any fees and charges associated with fixed-rate deals so as to help avoid financial difficulties should they decide to end their contract early. “There will be the temptation to fix your mortgage repayments for the long-term as more products become available offering ten-year deals or more. These do have benefits and can provide peace of mind, but such products often come with a significant sting in the tail if you change your mind and decide to leave early,” he stated.
Last month, GMAC-RFC suggested that despite fixed-rate products accounting for more than 75 per cent of secured loans borrowing since the beginning of 2007, those consumers who decide to opt for either a tracker-rate or discounted mortgage could find the deal to be an “attractive alternative”. According to the financial services firm, such products could prove to be a more competitive option for borrowers, as competitively priced fixed-rate deals become increasingly scarce and the Bank of England’s monetary policy committee is forecasted to lower the base rate next year. Julie Gaskin, corporate relations manager for the firm, suggested that although maintaining secured loans repayments has made sense in the current “rate rising environment” those who now opt for a discounted variable-rate mortgage on a two-year contract ahead of a fixed-rate deal could save themselves more than £1,000.
All About Loans providing you with breaking secured loan news.
