Variable rates holders 'set to suffer after rate rise'

Posted: 15 May 2007 10:53:44 GMT

Thursday's rise in the base rate of interest rates means that borrowers who hold variable rate mortgages will see an increase in repayment levels, according to mortgage broker London & Country (L&C).

Thursday's rise in the base rate of interest rates means that borrowers who hold variable rate mortgages will see an increase in repayment levels, according to mortgage broker London & Country (L&C).

The broker says that fixed-rate deals secured by borrowers three years ago will feel the pinch as deals taken out during this period come to an end.

L&C says that, for example, a two-year fixed deal from Newcastle Building Society a couple of years ago would come with a 4.49 per cent interest rate (based on a £150,000 loan), but would revert back to 7.34 per cent when the deal comes to an end.

It suggests that borrowers could minimise the impact of increased repayments by switching to a new fixed-rate deal, either with a new or existing provider.

Mortgage specialist at L&C James Cotton said that this option was the most viable for the consumer in the present climate.

"The advice is simple: see what new deal your lender is willing to offer and shop around elsewhere. Most importantly, plan ahead and don't leave it until you're already paying Standard Variable Rate, he commented.

L&C claims that it offers no-fee mortgages and calls itself the "consumer champion".

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