Though mortgage repayments account for little more than a quarter of take-home pay in the average household, the latest rise in interest rates could be the moment many homebuyers start to feel the pain. Since base rates hit the low point of 3.5pc in June, 2003, five successive quarter-point rises to 4.75pc have sucked £115 per month from the wallets of homebuyers on the average new mortgage of £110,000 on interest-only terms. Borrowers with similar-sized repayment loans are about £86 per month worse off. The turning of the screw by the financial authorities could be painful - Britain's biggest building society, Nationwide, says 240,000 households were "regularly having difficulties" with repayments even before this latest rise. But a gain from this pain is that people examine their mortgage arrangements more closely. When Which? magazine warned in January that UK households could waste £2.2bn a year by paying over the odds for mortgages, and that even borrowers with a £58,000 mortgage could be throwing away £475 per year, many of us were too busy spending to take any notice. Remortgaging accounts for about 46pc of mortgage business - but could top 50pc soon if the housing market slows. A survey of more than 1,000 homeowners by IFA Promotion, which represents independent financial advisers, found one in eight of borrowers' remortgages were to pay for home improvements. But only 9pc had remortgaged to cut monthly repayments. David Elms, IFA Promotion chief executive, said: "In spite of the growing awareness of property values, millions of homeowners ignore huge amounts they could save, simply by moving their mortgage to a cheaper deal." On average, reckons The MarketPlace, borrowers could save at least £85 a month - over £1,000 a year - by remortgaging. Ray Boulger, at brokers Charcol, said: "While the cost of switching is typically about £1,000 on a £100,000 mortgage, probable savings of about £150 per month soon wipe this out. "Switching to the best tracker rate at Birmingham Midshires, for instance, could cut the repayment rate by 2pc and monthly interest payments by about 30pc. "Because of costs involved, those on relatively small mortgages below £100,000 should go for packages with free valuations and free legal fees when they change borrowers. Above £100,000, borrowers must focus on getting the best rate of interest. On fixed rate loans, lock in for no more than two years, in case rates peak early next year and then fall again." Mr Boulger believes five-year capped tracker rate loans offer good value to borrowers seeking medium-term security while a fix for more than two or three years could be "an expensive mistake". Remortgage specialist, Peter Barrett at MyMortgage Direct, warns that what happens at the end of a tempting fixed-rate deal is all-important when there could be redemption penalties. Too many borrowers are "seduced by bargain basement-sounding, heavily-discounted products, only to find they come with a really nasty sting in the tail." Says Mr Barrett: "Always remember you don't get something for nothing. Free legals and valuation sound fine, but they might not be worth it when you are locked in for longer than two years." | 
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