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IS IT A FIX? By: Gordon

Interest rates are set to rise in 2011 and according to the Confederation of British Industry could be as high as 2.75%, adding £200 a month onto the average £150,000 mortgage.

Rock-bottom interest rates mean remortgaging has slipped off the radar for many people. Yet back in the heady days of 2006, when credit was plentiful and the words ‘credit crunch’ and ‘recession’ didn’t crop up from one month to the next, consumers were remortgaging like there was no tomorrow.

So when many borrowers came to the end of their fixed-rate mortgage term, instead of looking for a better deal, the most obvious solution was to stick with their lender’s SVR.

But all that is about to change. With experts predicting that 2011 could see the first base rate rise since 2007, many lenders have begun offering more competitive deals to attract customers keen to fix before the hike.

While the base rate is still so low, lenders need to offer competitive deals to lure consumers. Once that rate begins to rise there will be less need to be so competitive. Canny consumers are aware of this and are exploring what’s on offer now.

With lenders demanding hefty deposits and the likes of self-certification and interest-only mortgages becoming a thing of the past, the worry is that the criteria standard lenders will expect borrowers to meet could become too onerous

If you have a very high LTV it may also mean you can’t remortgage at all, so you’ll be stuck on your lender’s SVR, which of course will rise as the base rate does – and potentially by a greater amount.

Fixed rates offer the most security, and there are some good deals available at the moment, although some have pretty strict lending requirements.

The best advice is to review your current rate and research the market for alternatives. If you are sitting on a SVR with strong LTV you should be pro-active and consider a switch to a fixed rate to provide a degree of safety against predicted rises in interest rates

Contact Haxton, Chartered Accountants West London , for details of our strategic partners who will happily guide you through the options.

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