Martin Lewis urges people to check new mortgage support that could save them money

Martin Lewis from Money Saving Expert speaking to an audience of Londoners about the challenges they are facing as a result of the rising cost of living, hosted by London Mayor, Sadiq Khan at City Hall in London. Picture date: Thursday February 2, 2023. (Photo by Stefan Rousseau/PA Images via Getty Images)
Martin Lewis urges borrowers not to bank on interest rates coming down again soon. (Getty Images)

With mortgage rates in the UK hitting a 15-year high of 6.6%, many homeowners whose deals are due to expire will have some difficult decisions to make.

They may go up even further in the near-future – perhaps beyond 7% –with some traders betting on the Bank of England raising the cost of borrowing to a 25-year high early next year.

With so much uncertainty, it may be tempting to opt for a variable deal in the hope that interest rates start to come down again, but founder Martin Lewis warns this can be "dangerous" trap.

Speaking to ITV's Good Morning Britain, the personal finance guru pointed out that since around 2007, there has been a period of "super-low" interest rates that has been a historical "anomaly".

“Where rates are now is the normal, that’s what we had had, roughly for the prior 300 years. We’ve now had a 15-year anomaly, so there is no guarantee that interest rates will drop down to those super-low levels... There’s no 'when', it is only an 'if'.”

Read more: Mortgage rates could climb even further after hitting 15-year high today

Rowhouses in the district of Stratford, in the East End of London, Borough of Newham. London, UK
Mortgage rates have hit a 15-year high of 6.6% as the Bank of England tries to tackle inflation. (Getty Images)

With interest rates having risen significantly as part of the Bank of England's attempts to tackle inflation, a new "mortgage charter" has been brought in to help homeowners worrying about having to pay more.

Most of its terms don't come into force until August, but one particular feature came into effect on Monday that could save mortgage holders a lot of money, Lewis pointed out on the show.

Here's how it works.

Borrowers can ‘lock in’ new deal six months before renewal date

As of Tuesday, mortgage holders approaching the end of a fixed rate deal will now have the chance to lock in a new deal up to six months ahead.

They will also be able to manage their new deal and request a better like-for-like deal with their lender right up until their new term starts – if one is available.

This essentially means the borrower can hedge their bets. If interest rates go up over that six-month period, then borrowers who've locked in from the start will be paying a lower rate than otherwise.

Read more: Cost of living: Around three-quarters of eligible households missed out on energy bill support

If rates drop, then they are free to ditch the deal they've locked in and instead opt for something better. Lewis advises viewers to double check, but says that there usually aren't any fees involved for this process.

“You want to be looking ahead and at least banking yourself a product transfer now with the cheapest rate possible, which you can get rid of if you change your mind later, just in case things get worse," he added.

In even better news for borrowers, approximately 90% of the mortgage market has signed up to the charter.

What else is in the charter?

  • From 26 June, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.

  • A new deal between lenders, the FCA and the government permitting customers who are up to date with their payments to either switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments. Customers will also have the option to revert to their original term within six months by contacting their lender.

Lenders who have signed up to the charter

  • Aldermore Bank

  • Bank of Ireland UK

  • Barclays

  • Bath Building Society

  • Buckinghamshire Building Society

  • The Co-operative Bank, including Platform and Britannia

  • Coventry Building Society

  • Danske Bank

  • Darlington Building Society

  • Earl Shilton Building Society

  • Ecology Building Society

  • Family Building Society

  • Furness Building Society

  • Glasgow Credit Union

  • Hinckley & Rugby Building Society

  • HSBC, including First Direct

  • Kensington Mortgage Company

  • Leeds Building Society

  • Leek Building Society

  • Lloyds, including Halifax and Scottish Widows

  • Loughborough Building Society

  • Melton Mowbray Building Society

  • Metro Bank

  • Monmouthshire Building Society

  • Nationwide Building Society

  • Natwest, including RBS and Ulster Bank

  • Newbury Building Society

  • Newcastle Building Society

  • Nottingham Building Society

  • Principality Building Society

  • Progressive Building Society

  • Santander

  • Scottish Building Society

  • Skipton Building Society

  • Suffolk Building Society

  • Teachers Building Society

  • Tipton & Coseley Building Society

  • TSB, including Whistletree

  • The Vernon Building Society

  • United Trust Bank Limited

  • Virgin Money, including Clydesdale Bank and Yorkshire Bank

  • West Bromwich Building Society

  • Yorkshire Building Society

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