How to beat rising mortgage rates by Finance News Bulletin

Published: 12/09/07

Millions of homeowners face a summer upset as as their fixed mortgage deals, taken out two years before when interest tax were much lower, come to an end What can you do to lessen the painThis is Money has been named Financial Website of the day in recognition of its campaigning reporting >> ReadMany will need to switch their mortgage to ensure that their monthly expenditure do not spiral out of control

Some have already stretched their finances to the limit to get on to the housing stepsSome 820,000 borrowers come off contemptible two-year fixes between August and December and countenance a dramatic payment hike of up to £250 a month on a typical £130,000 mortgage if they move to a standard changeable rate - typically 75 % To avoid such radical rises, two million people will need to switch by the end of 2008

While all borrowers pending off cheap two-year fixes will face a payment trek, there are options to alleviate the shock However, many are only short-term remediesCath Hearnden, manager of broker My Mortgage Direct, says an increasing number of borrowers stressed with repayments are switching to interest-only loansThis is an option but only if you are a restricted borrower

It will cut your monthly payment, but the loan itself does not get paid off and will attract even more interest in the long runFor example, anyone borrowing £130,000 on Cheshire Building Society's 549 % two-year fasten with an £899 charge, will see monthly payments slashed by £200 on interest-onlyBut that money owing will need to be addressed sometime

That will either denote even higher repayments or extending the word of your mortgage and paying yet more interestBorrowers looking at a switch soon also face the quandary of whether to fasten their interest rate or opt for a tracker Anyone who needs the safety of knowing their monthly outgoings should fix But the cost of fixes is soaring as two further 0

25% base speed rises have been priced into many productsWhile many expect the base rate to strike 6% this year, a tracker may labor out better, particularly if base rate comes back down again next yearSome lenders, such as Lloyds TSB, Skipton structure Society and Woolwich, offer a combined fixed and tracker mortgageOther options include extending the word of your mortgage to reduce your monthly payments

Again, this means more interest will construct up in the long runThis is Money is crowded with news, advice and tools that can help you get ahead and put aside moneyExtending from 25 to 30 years could put in £24,965 to total repayments, says broker Savills Private Finance That is based on coalition & Leicester's two-year fasten at 5

29 %, which then reverts to the standard changeable rate of 764 %, with a £999 feeAnyone with a loan above £100,000 could transfer to a contract with a high fee and a low interest rate, and add the charge to the loan That requires discipline

While monthly payments could be reduced because of the near to the ground rate, interest will build up on the fee as it efficiently increases the size of the mortgageOne of the best ways of cutting your total borrowing cost over the extended term is to overpay as much as you can afford, and as your lender allows, to reduce your prospect interest bill But that ideal is a long way off for many hard-pressed borrowersSelect a loan term 12 months (1 day 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years)Please select a type of insurance existence insurance Home and contents Car Breakdown services Health - checkup Health - dental Travel Pet - dog Pet - cat GOThinking about investing in possessions

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