Royal London has warned homeowners to think twice before incurring early exit charges in a rush to secure a cheap fixed rate mortgage.
The insurer has found that some providers have held or even cut rates following the recent Bank Rate rise.
The Bank of England’s decision to raise interest rates to 0.5% was widely expected to raise the cost of mortgage borrowing. It was thought borrowers would rush to secure the cheapest long term fixed rate deals before they can be withdrawn from the market. In some cases homeowners could incur early exit charges from their previous mortgage as they rush to secure the best deal.
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. This was compared to the new rates these lenders published three weeks later on Friday 3 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 percentage points, 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 percentage points.
Helen Morrissey, personal finance spokesperson at Royal London, said: “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.
“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.”