MARTIN Lewis has warned of a mortgage "ticking timebomb" if interest rates reach 6% next year.
The MoneySavingExpert said that future rises in interest rates could be "catastrophic for mortgage holders."
Speaking on ITV’s Good Morning Britain, Martin Lewis said that those on variable rate mortgages or fixed deals coming to an end in the next three to five months should go on a comparison website to see what is currently available.
The MoneySavingExpert.com founder said: "Then check your existing company to see what it will give you and then mortgage brokers are worth their weight in gold right now."
Mr Lewis said that, for some, there may be a logic to breaking their fixed deal: "It is not right for everyone – you want the mortgage broker to do those numbers."
The Bank of England has said that it may need to raise interest rates to as high as 6%.
READ MORE IN MONEY
I’m a mortgage expert – how to reduce your bills now
House prices ‘could fall by 15%’ as rates crisis drives up mortgage costs
But the move will add substantial costs to mortgages.
Martin said: "Once you start applying (for a mortgage) you have to pass an affordability check.
"Clearly, many people will start failing affordability checks at that rate. So they’ll either be stuck on only their own company’s deals or going to a standard variable rate.
"And worse, because we now have a risk to house prices, that’s not a prediction, I’m saying there is a risk that house prices may drop, they may not, they may continue to go up.
Most read in Money
Millions selling their belongings to pay off bills, alarming new survey shows
Defiant Liz Truss insists 'we had to take urgent action' amid budget chaos
Households urged to take meter readings NOW ahead of energy bill rise this week
£1trn of pensions narrowly saved as Truss & Kwarteng accused of going AWOL
"And if house prices drop, that will hurt people’s loan-to-value ratios, which will make it even more difficult to get a cheap mortgage."
Martin said: "What has happened to our market is specific to the UK, based on the decisions that were made in the mini-budget."
He said that the vast swathe of tax cuts have spooked the markets which has lead to lenders withdrawing mortgage products from sale and pricing deals upwards in response.
The choice of mortgage products is continuing to shrink, according to MoneyFacts.co.uk.
Between Friday September 23 and today a total of 1,621 residential mortgage products have been withdrawn leaving 2,340 on sale.
Brokers have said they expect lenders to return with new deals in the coming days.
David Hollingworth of mortgage broker L&C Mortgages said: "There are still plenty of changes occurring and still plenty of lenders biding their time before they relaunch rates into the market.
"Some of the major players are adjusting their rates by either pushing them up as Nationwide did yesterday and HSBC did today and or slimming down their range, as Halifax and Barclays have done."
Rightmove’s housing expert Tim Bannister said: "The number of potential buyers requesting to view properties on Monday and Tuesday was down 3% compared with other Mondays and Tuesdays this month, and demand is still significantly higher than the supply of homes for sale.
Read More on The Sun
I was embarrassed when I found a lump down there – now I’m fighting for my life
I spent £115 on an IKEA haul, the items totally transformed my living room
"Over the past month, activity has shown that the housing market has been surprisingly resilient against headwinds of rising rates and so it looks like for those who can move, they’re going ahead for now.
"We’ve seen demand softening in the past few months, but buyer demand is still 20% higher than the pre-pandemic five-year average, house prices are 15% higher than they were two years ago, and the overall number of homes going through conveyancing is 40% higher than in 2019."
Source: Read Full Article