MARTIN Lewis has issued an urgent warning to homeowners to check to see if they can save cash now.
Households that have secured a mortgage deal that hasn’t yet started could now get a cheaper rate, according to the consumer champion.
Homeowners could save £560 a year by following the tip
In the latest MoneySavingExpert newsletter, the team said: “If you fixed while rates were at their peak, check now whether you can get a cheaper deal.
“Most lenders let you cancel without a fee, provided your new mortgage hasn’t started yet.”
Homeowners that follow this tip could now save £47 a month or £560 a year by checking if they can get a cheaper mortgage rate now.
The advice comes after lenders started to cut fixed mortgage rates after the Bank of England lowered its interest rate forecast for next year.
Last month the cheapest two-year fixed-rate mortgage was 5.6% but it’s now fallen to 5.07%, according to MoneySavingExpert.
Despite the biggest interest rate rise in 33 years earlier this month – an increase of 0.75 percentage points to 3% – homeowners have been given some relief.
The Bank of England revised its predictions on how much interest rates will rise in future.
After the Mini-Budget it had warned that they would hit 6% next year, which caused mortgage lenders to hike fixed bills.
However, the Bank now predicts that rates will hit a maximum of 4.6% next year – allowing lenders to slowly cut some mortgage rates.
Martin Lewis’ team said that homeowners that secured a new fixed mortgage rate last month should check to see if their deal has started yet – if not they could make substantial savings.
The MSE team said: “Most lenders let you lock in a fixed mortgage deal months in advance – something that’s been popular recently as interest rates have been on the rise.
“Yet the first thing to do is to check if your new mortgage rate has started yet…”
If your new deal hasn’t started yet and you find a cheaper mortgage deal you should then be able to cancel penalty-free.
Some may face new booking and legal fees to take out the new deals but the savings made from a lower fixed rate deal outweigh these small upfront costs.
Those whose new mortgage deals have already started will be charged a fee to cancel and these can cost £1,000’s.
The MSE team said: “In this situation, it’s very unlikely to be worth switching right now unless you find a deal with a seriously better rate than what you’re currently on.”
How to find the best mortgage deal?
Shop around for the best mortgage deals rather than opting for the first bank you see.
Remember a bank or building society will only offer its own options which limits your choice.
You can also use a comparison website to find deals across the market based on your level of deposit and whether you want a fixed or variable rate.
A comparison website will usually let you search for all types of home loans such as for first-time buyers or the best buy-to-let mortgage deals.
This will give you an indication of what is on offer but you will need to do the application yourself.
Some lenders may not be on comparison websites so it is worth searching directly online as well.
Alternatively, a mortgage broker can help search the market more widely and find the most suitable deals for you.
Is it better to get a mortgage from a bank or a broker?
A bank may offer the best mortgage deal for you but shop around before you commit.
This is because a bank adviser will only offer their own products.
Going through a mortgage application can be stressful and time-consuming so you want to ensure you have a good chance of success.
Limiting yourself to one bank’s products could mean you end up paying more than you needed to or you may not even meet their criteria.
Mortgage brokers also get access to exclusive deals through the intermediary-only arms of banks and building societies.
These could be the best mortgage deals compared with the rest of the market depending on your needs and competition at the time.
However, there are some lenders that don’t work with brokers and advisers may be tied to a panel of lenders so you could also miss out on other offers.
Make sure you shop around to compare these with the rest of the market as you could save money by switching elsewhere.