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Fixed-rate mortgage holders should watch interest rates, claims financing analyst
Fri, 09 Feb 2007
Mortgage holders who are trying to come to terms with the implications of the recent interest rate decision have been given advice by a financing portal.

Fool.co.uk, which offers guidance on a range of financial services issues, has said that the decision by the Bank of England's monetary policy committee to hold the base rate at 5.25 per cent should alert people on fixed-rate mortgages as well as those with tracker deals.

Homeowners with time left to run on their fixed-rate mortgage offers will not see their interest repayments increase immediately, regardless of the Bank's decision.

However, David Kuo, head of personal finance at the financing website, points out that when the introductory period of the mortgage ends, their standard variable rate will typically reflect interest rate changes.

And specifically addressing fixed-rate mortgage holders, he said that it is "important that they use the fixed-term period to make appropriate adjustments to their budgets as and when interest rates rise".

He added: "This may mean cutting back on non-essential spending."

Generally, fixed-rate mortgages revert to standard variable rate deals when the initial offer periods expire.

Because these typically involve higher lending rates, at this point many mortgage holders take the opportunity to search for alternative mortgage financing arrangements.

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