'Rate shock' borrowers urged to remortgage

Nationwide has urged fixed-rate borrowers who will see their mortgage mature between October and December to consider remortgaging to protect themselves from a 'rate shock'.

In autumn 2005, the average rate for a two-year fixed-rate mortgage was 4.56 per cent, but since then the base interest rate has increased by 1.25 per cent.

According to Nationwide, the average standard variable rate charged by lenders is now 7.75 per cent, meaning that fixed-rate borrowers who entered their deal two years ago will see a rate increase of three per cent if they let their mortgage mature.

The building society said that even customers who do remortgage will still see an increase in monthly costs and should choose their new product carefully to ensure they keep repayments as low as possible.

Matthew Carter, Nationwide's director of mortgages, said: "For some borrowers it will come as a quite a fright to see their mortgage payments increase dramatically.

"To absorb some of this shock, borrowers need to consider remortgaging as soon as their deal ends, or beforehand if their lender allows it. Those who prefer to avoid the unexpected may be thinking about fixing for a longer period."

Related Articles