Martin Lewis warns of ‘time bomb’ of rising prices for everyone with a mortgage

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Martin Lewis has warned how households face a “time bomb” of more expensive mortgage rates due to rising interest rates.

The MoneySavingExpert explained how homeowners who are coming off a cheap deal may find they cannot fix again at the same rate.

This is because the Bank of England has hiked its base rate, and this is used by lenders to determine how much people are charged to borrow money. Interest rates are currently set at 1%.

If you’re on a tracker mortgage and interest rates are hiked, then your rates go up in line with this base rate.

For those who are on a standard variable rate (SVR) mortgage, it is down to your mortgage provider to decide whether to pass on the increase to its customers.

It is likely your repayments will go up, as most of the major banks and lenders did raise their rates after the last BoE announcement.

Martin also warned how savers have less money than they did before due to rising costs – and this means it will be harder to pass affordability checks.

When you apply to take out a mortgage, a lender will look at your income and outgoings to assess whether you can afford your repayments.

Martin told viewers of his Martin Lewis Money Show Live broadcast on ITV : “To get a mortgage, to be accepted, you have to pass a credit check and an affordability check. An affordability check examines ‘have you got room to pay this mortgage’.

“But we’re in the midst of a cost of living crisis. So everyone has less room than they did before because other costs have gone up.

“So my great fear is we’ve seen interest rates go up but more people aren’t going to be accepted when they apply for a mortgage because more are going to fail affordability checks.

“And that leaves us with a ticking time bomb because most people are on cheap fixes and they’re going to expect to fix again on the cheap rate and it’s going to be a lot higher and they may not be able to get them and that is a real problem coming forward.”

If you have a fixed-rate mortgage, your rates won’t change – although Martin explained you may want to consider locking into a cheap deal now if your current mortgage is due to expire.

For those who are really worried about paying more, he suggested the best thing to do is “fix and fix longer” so you’ve got more reassurance for a longer period of time.

“If you’re coming to the end of your rate, you need to prepare in advance,” Martin explained.

“You might even want to pay a booking fee to lock in a cheap mortgage in case things get more expensive and if it doesn’t you can get a cheaper one elsewhere.

“It’s like an insurance policy so you lose a few hundred quid but have locked in a cheap mortgage. Speak to a mortgage broker for help.

“If things are going up and you want certainty and you can get a cheap five year deal, a five year deal will give you certainty.

“I can’t promise it will have been cheapest when you look back in hindsight, but if you want peace of mind, in an uncertain world – and boy are we in an uncertain world – then fix and fix longer.”

About the author

Surjo Das

Surjo Das is a Digital Media Publisher and freelance copywriter. He has been working in the publishing industry for over 5 years now, holding various positions at different publishing houses Worldwide. His work experience includes managing marketing campaigns, content development, and website maintenance for various industries including healthcare, IT, finance, and education. He also offers to ghostwrite services to help aspiring authors get their books published while maintaining creative control over the project.

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By Surjo Das

Surjo Das

Surjo Das is a Digital Media Publisher and freelance copywriter. He has been working in the publishing industry for over 5 years now, holding various positions at different publishing houses Worldwide. His work experience includes managing marketing campaigns, content development, and website maintenance for various industries including healthcare, IT, finance, and education. He also offers to ghostwrite services to help aspiring authors get their books published while maintaining creative control over the project.

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