Martin Lewis warns homeowners not to make ‘dangerous’ mortgage mistake

Money saving expert Martin Lewis issued a warning to homeowners due to a “dangerous” concept many Britons may think about.

On ITV’s Good Morning Britain today, the money saving expert explained that there is “certain value of fixing longer,” however he worries that Britons are not aware of what interest rates have been like historically.

He said: “I do worry about the concept that has people saying to me, ‘I’m going to wait until rates go back to normal’ and I think that’s a really dangerous thing to say.

“What is tough for anybody under the age of 35 to understand is the last 15 years has been an anomaly.

“If you look at a historic context, where rates are now is normal so there is no guarantee that interest rates will go down to those super low levels.

“I’m not saying they won’t, but you can’t say they must.”

He explained the best thing people can do is look at their own finances to see how much they can afford to put towards their mortgage each month.

Britons should consider looking for fixes they can afford and seeing if they can lock in a rate for surety.

Mr Lewis continued: “If surety is most important to you, then fix. If you have room to pay the variable rate for a few months then you might want to do that, but there is a risk things will get more expensive.

“The advantage here is a mortgage charter brought it yesterday.”

He explained that Britons now have a right to get a mortgage transfer with their bank. Customers coming to the end of a fixed-rate deal will have the chance to lock in a new deal up to six months before.

They will also be able to manage their new deal and look out for cheaper ones right up until their new term starts if one is available.

This means if someone locks in a rate now in July, that rate will be honoured until their mortgage renews in January.

If a new deal comes and it’s better than the one they have locked in then people will be able to switch to it.

For someone coming of a two-year fixed rate, when they fix again now, they will be paying roughly £200 a month extra for every £100,000 of outstanding mortgage.

The UK base rate currently sits at five percent, however, the market predicts they could rise to 5.5 percent to 5.75 percent.

However, some outliers suggest they could reach seven percent in upcoming months and will be like this until 2024.

Responding to these predictions, Mr Lewis said: “Rates could possibly get higher than they are.

“If you look right now, a five-year mortgage is cheaper than two-year mortgage and a ten year mortgage is cheaper than a five year mortgage.

“It’s because they predict the long-term interest rates will come down so there’s certainly value in fixing longer or relative value in fixing longer.”

ITV’s Good Morning Britain continues tomorrow at 6am.