Personal finance: My fixed-rate bargain has become a burden

WHEN interest rates dropped to 5.5 per cent earlier this month I had to grit my teeth. Like thousands of borrowers, I sorted out a long- term fixed rate mortgage in 1996 when interest rates were predicted to go much higher.

To begin with, they did. In July last year, the average mortgage rate was 8.95 per cent and my 6.99 per cent deal was looking good. The consensus at the time was that rates would rise over the five-year term of the mortgage and then drop again around the time of a general election in 2001 or 2002.

No one mentioned Europe. Perhaps we all thought it would go away if we ignored it. Yet interest rate convergence at 3 per cent across euroland is the single biggest factor affecting interest rates in the UK. By the time my fixed rate ends, in 2001, the UK may have joined the single currency.

Standard mortgage rates are now 6.95 per cent at most. After the next fall in rates, I will be paying over the odds.

A fixed-rate deal is a gamble against the rates but some people have already lost out very badly. In 1995, five-year fixes were selling at 9 per cent or more.

If you are stuck in an expensive five-year fix, find out what it costs to get out of the deal. You will probably be asked to hand over six months' interest payments to exit from the mortgage. If you have an interest-only mortgage then that's easy to work out. Contact the lender if you have a repayment deal.

You should also get quotes for a new deal - see the tables on page 26 for this week's selection - and work out how much (if any) cash you'll save by swapping.

Get a makeover

Do you want some valuable but free help to sort out whether you should remortgage your house, buy for the first time or even pay off the lot?

We are finalising a series of readers' mortgage makeovers in association with the independent mortgage broker, Chase de Vere. The deal is you tell us all about your financial situation and have your picture in the paper. In return you get hundreds of pounds' worth of mortgage advice and stand to save thousands off your loan.

You still have time to apply.

Send details to me at the e-mail address below or write in to Mortgage Makeovers at The Independent on Sunday, One Canada Square, London E14 5DL.

i.berwick@independent.co.uk

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'