For at least 3 million fixed mortgage holders, a shock may be coming as many of these loans become variable at the end of their fixed term. It is estimated that anywhere from 1.4 to 3 million fixed mortgage loans may be at risk for default when this switch occurs later this year. Previously, banks were luring consumers in with initial low fixed mortgages that would convert in a few years. Some thought they could refinance before that happened, but with the current conditions, that may not be possible.Ann Robinson, the director of consumer policy at Uswitch, comments: “This is a real catch-22 for consumers who are struggling to find the funds to pay mortgage set-up costs. In fact, by allowing consumers to add fees on to the mortgage, it could be argued that providers are doing them a good turn. This is particularly true for first-time buyers where it could mean the difference between getting on the property ladder or not.She continued, “However, adding fees to a mortgage means that you will be spreading the amount over many years and paying interest for the pleasure of doing so – this is an extremely expensive option and should always be seen as a last resort. If you can manage to pay the fee upfront this will always be your best option. Otherwise buyers should make sure that they make regular overpayments to minimise the impact of high interest costs – as they could end up doubling the original cost of an arrangement fee.”
Related reading: Fixed Mortgage
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