Mortgage brokers are advising homeowners with mortgages to lock in their loans at the low fixed rates as soon as possible because interest rates will soon start to rise in a significant way.

The Bank of England has left its base rate unchanged at 0.5% and this is likely to remain for several months. However, as the recession comes to a close, it is predicted that there will be a steep rise in these rates before the end of the year.

Ray Boulger of the mortgage broker John Charcoal said that “whilst it is difficult to be confident how long bank rate will stay at 0.5%, it is likely than when the MPC starts increasing it it will move up quite quickly, which could be very uncomfortable for anyone still locked into a variable rate mortgage at that time.”

He went on to say, “ Borrowers on variable rate mortgages, especially those with any sort of interest-only mortgage, should therefore be very aware of the risk of a rapid rise in their payments at some stage, even though that may not happen this year. Switching to a fixed rate will be the best way for most people to buy protection from rising rates.”

This same sentiment was echoed by David Hollingworth of the mortgage broker London & Country, who said, “There has been just a little bit of movement in fixed rates, which suggests that rates could start going higher. There seems to be little value in going for a variable rate mortgage now.”

Woolwich recently lowered its fixed rate mortgage interest rate by 0.7%. This lender currently offers two-year mortgages at 3.69% for up to 70% of the purchase price of a home. Homebuyers who want a higher percentage of the purchase price are looking at higher interest rates, such as 4.99% for loans of 80% of the purchase price. A three-year fixed rate mortgage for 70% of the purchase price stands at 3.99%.

Hollingworth also pointed out that HSBC has lowered its interest rates on mortgages as well. Homebuyers wishing to take out a mortgage for 75% of the purchase price of the home can opt for a three-year term at 3.99%. The application fee for such a mortgage is £599. At another lender, the Britannia Building Society, you can borrow up to 60% of the money needed at 4.24% for a three-year term.

First time home buyers can benefit from this low interest on fixed rate mortgages too. They can borrow up to 95% of the money they need at 6.99% from both Clydesdale Bank and Yorkshire Bank. Those who can make a deposit of 10% can benefit from an even lower rate of interest at 5.99% with an application fee of £599.

Deals are even better at the Royal Bank of Scotland where five-year fixed rate mortgages for 90% of the loan value carry an interest rate of 5.99% and there is no application fee.

Homeowners and homebuyers are well advised to take advantage of these offers in order to save money on their mortgages over the coming years.

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