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Borrowers set for mortgage pain Times Online, 07 November 2006 According to MoneyExpert.com, a comparison service, borrowers who opted for a fixed-rate mortgage three years ago will be hardest hit. With their fixed rates due to expire, they will be moved to average standard APRs of around 6.55 per cent – more than two per cent higher than the average rate adopted by homeowners in 2003. In 2003, the average fixed-rate deal had an APR of just 4.22 per cent, chiefly due to a much lower base rate of 3.5 per cent. Borrowers paying 4.22 per cent on a £100,000 mortgage on a repayment basis in 2003 would have faced monthly payments of around £545 but with a move to a 6.55 per cent rate, their payments would increase to £725 a month or an extra £2,160 more a year. Presently the average fixed-rate APR is 5.55 per cent, but deals start from as low as 1.8 per cent for two years with Newcastle Building Society. Some 39 per cent of mortgages taken out in 2003 were in fixed-rate deals, totalling 1,059,000 loans and the popularity of fixed-rates has never been greater, with over 1.3 million deals struck last year according to MoneyExpert.com Sean Gardner, the chief executive of MoneyExpert.com, said: "The mortgage market is different from three years ago, but that's not to say that there aren't great deals to be had. Savvy homeowners can keep a low rate if they do a bit of homework and review the market. Even taking into account application fees, switching from a high default standard rate to another fixed rate deal will make a big difference." Fixed-rate mortgages have been steadily increasing in cost since the Bank of England raised interest rates in August. With the Bank expected to hike borrowing costs by another quarter point later this week and another rise expected early next year, fixed-rate mortgages are likely to get even more expensive. Story by BBC News .Read the full article here |
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