Homeowners are being urged to grab any competitive mortgage deals that remain while they're still available because, according to Fool.co.uk, they won't be around much longer.
After six months of watching the Libor – the rate at which banks lend to each other – slowly go back down from six per cent to 5.7 per cent, somewhat easing difficult lending conditions and allowing mortgage
rates to fall slightly, borrowers have had to sit and watch while it shot back up to six per cent in less than a week.
Recent turmoil in the financial markets, after the collapse of investment bank Lehman Brothers, has swiftly undone any progress which had been made in the mortgage markets, and homeowners can now expect rates to climb back up, Fool.co.uk warns.
As the Libor came back down after the outbreak of the credit crisis more than a year ago, cheaper borrowing costs for lenders meant that they could pass on this saving to their customers in the form of cheaper mortgage deals. The typical SVR (Standard Variable Rate) fell from 6.74 per cent to 6.49 per cent in the last six months, but Fool.co.uk says that it will be only a "matter of days" before this progress is undone.
"LIBOR is a better guide to the costs of fixed-rate and Standard Variable-Rate mortgages than the Bank of England
base rate." explained David Kuo, head of personal finance at Fool.co.uk. But, he continues, "mortgage rates currently on offer do not adequately account for the recent surge in LIBOR."
Therefore, he urges homeowners with fixed rate mortgage
deals that are about to end to apply for the best deals available "without delay" in order to avoid the rate hikes that are coming. He also reminds borrowers that lenders usually allow customers to arrange a mortgage six months before they need it.
"Unless suitable arrangements are made soon," he warns, "homeowners may find that any attractive deals currently available could be withdrawn. A 0.25% rise in SVRs can cost almost £5,000 more on a £100,000 loan over 25 years.
"Opportunities in finance are rarely preceded by bugle and trumpet heralds. But the imminent withdrawal of attractive mortgage rates is deafeningly obvious." he said.
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