Fixed-rate mortgages 'have large exit penalties'
Published On 4 August 2007
Picking the 'wrong' mortgage deal could turn out to be an expensive mistake, a consumer website has warned.Research carried out by MoneyExpert.com found that consumers who find themselves tied into uncompetitive fixed-rate mortgages typically have to spend £6,370 to get out of the deal.
Three interest rate increases since the beginning of the year have encouraged many people to opt for fix-rate mortgage deals, but the website has warned that these consumers face large redemption charges if the economic situation shifts.
The charges faced by consumers who want to switch from an uncompetitive fixed-rate mortgage vary with time, but exiting after less than three years will typically cost the homeowner more than £6,000.
"Homeowners have been told to fix their mortgage deals since last summer as interest rates continue to rise, and lenders have obviously been keen to capitalise on this," warned Sean Gardner, the consumer website's chief executive.
"With further rate rises not out of the question, we anticipate that even more homeowners will consider fixing before the year is out. So it's important that people are aware of all the pitfalls - as well as the benefits - of fixed-rate mortgages."
Figures from the Council of Mortgage Lenders suggested that 73 per cent of all home movers opted for a fixed-rate mortgage in May.
