A new survey conducted by uSwitch.com revealed that although mortgage arrangement fees cost Brits around £3bn total every year most are not aware of the fact that failure to do so may hurt them in the coming months with the rise in the increase rate.
The research group discovered that a great deal of Brits who are attempting to secure fixed mortgages in an attempt to ease their budgets are continually being caught off guard by the high prices associated with remortgaging their current terms. The news was furthered cemented by a report from unbiased.co.uk, an independent financial advisers organization, that reported that about 17% of all mortgage holders that have variable rate mortgages and 13% of those with tracker mortgages do not have any idea of how the change in the base rate, expected to happen later this year, would affect their mortgage rates and thus the price of their monthly mortgage payments.
Out of those, 16% reported that they know that the mortgage payments will increase but they do not know how much or how the base rate actually affects their mortgage terms. The actual reality of the situation is that when the Bank of England base rates increase lenders usually choose to hike the mortgage rate up by the exact same amount so if there is an increase of 5% as anticipated than there would be another .25% reflected in the mortgage payment.
To put this into perspective, if a homeowner had a £100,000 mortgage that was set at 5% and the base rate increase by .25% then they could expect to pay another £14.65 added onto their monthly payment of £176. While £14 does not seem too intimidating, the base rate for the Bank of England is not expected to jump by .25%, it is expected to jump by almost a full 5% which is where panic starts to set in.
This in turn has led to people flocking towards switching their variable and tracker mortgages to fixed mortgages, but the problem is that with the rates raising the arrangement fees that are added into a mortgage rise as well with average fee for a fixed rate mortgage arrangement increasing over the variable by about another £720. This fee in itself is too high for most struggling homeowners, but the option of higher monthly payments is just as threatening, leaving a great deal of surprised Britons in a real Catch-22.