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Fixed rate borrowers could face payment shock

More than 315,000 homeowners who took out fixed rate mortgages at the end of 2003 and the start of 2004 could be heading for a shock when their special deals run out, warns mform.co.uk.

Analysis from the consumer comparison website shows these borrowers could be facing monthly increases of as much as £140.

Average fixed-rate deals between November 2003 and March 2004 were 4.67% hitting a low of 4.28% in November 2003.

But base rate changes since then have sent average fixed-rates up to around 5.26% with the Bank of England raising rates by 0.5% during 2006.

Francis Ghiloni, marketing and business development director of mform.co.uk, says: “Borrowers who took fixed-rate deals in 2003 have done spectacularly well.

“But the market has changed radically since then and rates have moved substantially.

“People who picked up good deals three years ago proved they were ‘rate smarts’ and need to maintain that record by choosing wisely again.”

Ghiloni warns that the Bank of England has been gradually raising interest rates and that is having a major impact on the mortgage market.

He adds: “With thousands of mortgages and over 100 lenders to choose from borrowers have plenty of choice so there is no excuse for apathy and anyone tempted not to review their circumstances may pay a high price.

“However choosing a mortgage must be about more than simply picking the lowest initial interest rate.

“We urge borrowers to focus on the true cost of their mortgage by taking account of factors such as insurance, legal fees, application fees, product features and the ability to make over-payments.”

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