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CML advises caution despite rate freeze

Although the Bank of England has chosen to keep the interest rate at 5.5 per cent, the Council of Mortgage Lenders (CML) warns borrowers with fixed-rate mortgages that they still need to plan ahead as many two-year deals come to an end.According to CML's statistics, around 1.3 million homeowners signed up to fixed-rate mortgages in 2005 and about 1.5 million took out fixed-rate deals in 2006.Although not all of these mortgages will be fixed for two years, the majority will, meaning that many borrowers will be coming to the end of their fixed-rate deals in 2007 and 2008. These customers should plan for higher payments, which could be between 0.75 per cent and 1.5 per cent more, CML advises. Michael Coogan, CML's director general, commented: "While today's decision not to raise rates is welcome, there is no cause for complacency. More than two million borrowers over the next year and a half will reach the end of fixed-rate deals, and will face the prospect of higher mortgage payments."For most people, the scale of the increase will be manageable. But it makes sense for borrowers whose fixed-rates will end soon to start planning ahead now, and to recognise that their monthly costs will be higher in the future. Anyone who thinks they may face financial difficulties should talk to their lender at an early stage to see what steps can be taken to improve their situation."

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