Simple mortgage trick that could save homeowners thousands of pounds in payments

Experts urge homeowners to make the vital changes as interest rates increase

Estate agents placards are seen in front of houses in London (Daniel Leal/AFP via Getty Images)

Homeowners are being urged to take advantage of a simple mortgage hack that could save homeowners thousands of pounds each year.

By switching to a cheaper mortgage rate, monthly repayments could be considerably cheaper.

In the cost of living crisis, homeowners and renters alike are searching for new methods to save money to combat surging energy and food bills and no better time than before the Bank of England increases interest rates again this week.

Interest rates currently stand at 1 per cent, its highest level in 13 years after the Bank of England increased interest four times in a row since last year.

When interest rates increase, so do mortgage rates making it more costly for homeowners to pay off their property. In this instance, hundreds of pounds have been added to monthly mortgage repayments for millions of people.

Around 1.5 million fixed-rate home loans are set to expire this year, according to banking trade body UK Finance marking a crucial moment for thousands of families to change their plan.

Changing mortgage rate could save homeowners thousands of pounds (PA Archive)

The average two-year fixed rate mortgage was 2.2 per cent in November 2021 but has increased to over 3 percent today.

A fixed deal allows borrowers to lock in their rate for a period of two, three, five or even ten years. When it ends, they must pick a new deal to avoid paying their lender’s ‘standard variable rate’, which is usually vastly more expensive. the typical standard variable rate (SVR) - the rate paid automatically when your deal ends - has gone up from 4.41 per cent to 4.78 per cent over the same period.

Homeowners are being urged to act now while there are still good deals available - and it could save thousands of pounds.

Most lenders offer a loophole that allows borrowers to apply for a new deal up to six months before their term expires — which could prove invaluable in the current market.

The interest rate is expected to increase again this week pushing mortgage payments up (PA Wire)

The interest rate could jump to 1.25 per cent this week and increase further to 2 per cent by the end of the year, experts have warned. As a result, cheap mortgage deals are fast disappearing with all sub-1 per cent deals vanishing last year.

Rosie Fish, of online mortgage company Habito, says: “If you have six months or less left on your current deal, now is the time to get ahead of any further rate rises.

“The cheapest deals on the market are being withdrawn at short notice, so make sure your documents are in order to help avoid delays when it’s time to submit your application.”