The Bank of England Base Rate is at a record low, following two successive cuts to the Bank Rate as an emergency measure in response to the coronavirus crisis back in March. While it may have been a blow to savers, mortgage borrowers may have been able to benefit from low rates.
It’s something which the website Money Saving Expert, which was founded by Martin Lewis, has highlighted.
Writing in the weekly newsletter last month, the website explained that there may be opportunities to make substantial savings on a mortgage during this time.
It means that, while millions may be asking for payment holidays, those still able to keep up their mortgage payments and who have not seen their income affected, may be able to instead save money.
It’s something which one Money Saving Expert user has managed to do.
The homeowner, who is known as “MC”, emailed the website to explain that they had followed the website’s remortgage help, and is now repaying their mortgage 10 years early.
Amid expressing their thanks, the borrower explained that it meant that they would save an astonishing £55,000 overall.
So, what are some of the ways in which people can cut costs on their mortgage?
Express.co.uk spoke to Money Saving Expert’s deputy editor, Guy Anker, about some options.
“Reducing the term is one of the tricks you can do,” he said. “Normally, most lenders will charge a fee.
“It might be £50, it might be £100, it depends on the lender – just for the administration of it.
“They might do checks on you, that you can afford to increase your monthly payments.
“It means you pay more every month, but it means you’re paying it off for a shorter period.
“And because interest is charged on a daily basis on most mortgages, every day you have an outstanding balance there will be a few pennies added to the interest cost.
“If you shave a few years off it, you might well save thousands of pounds indeed.”
Those really struggling financially right now may look into the option of getting a mortgage payment holiday.
“It’s worth speaking to your mortgage lender if you are really struggling, and see if you can get a payment holiday,” Mr Anker said.
“What I would warn though is interest still accrues while you’re on that payment holiday. So it does mean that over the course of the mortgage you’ll pay a little bit more in interest.”
It may be that a mortgage payment holiday isn’t for everyone.
But, there may still be action borrowers can take amid the coronavirus crisis.
“The big one is, lots of people – I think it’s over one million – are on their Standard Variable Rate.
“This is the rate most mortgages revert to after say, a two-year introductory period or a five-year introductory period. And these are normally very high rates.
“For lots of people, it’s going to be cheaper switching to a cheaper mortgage, or remortgaging as it’s known in the trade.
“The only thing is, it was always tough to get a mortgage. You needed to not miss any payments on any type of bill, you needed to have a certain amount of equity in your property to get the best deals.”
He continued: “It’s got even tighter since coronavirus. That was the worry, that not everybody could pay off their mortgage hence why some people are taking payment holidays.
“So they really will interrogate your finances. You’re probably on the phone for a couple of hours doing your application,” Mr Anker added, as he pointed out that thousands of pounds could potentially be saved.
Published at Sun, 07 Jun 2020 03:01:00 +0000