Higher Interest Rates And Remortgaging Options

As of the August of 2023, the Bank of England has increased its base rate for the 14th consecutive time, making it more difficult for borrowers to get good mortgage deals. The current base rate of 5.25% is the highest it has ever been since March 2008. Speaking of high rates, the average two-year fixed mortgage rate in the UK is now at 5.85% which is better than Oct pick of 6.55%.

So, is this a good time to remortgage your property and move to a better deal?

To answer this question, it is important to understand the current property market in the UK. Let us have a quick look at what is happening to the mortgage rates in the country.

The current state of mortgage rates in the UK
The interest rates in the UK surged as a consequence of the mini budget because of the markets panicking over unplanned Government borrowing. By the end of October 2022, the average interest rate reached an all-time high of 6.55%.

While the interest rates dropped a little since October last year, analysts started increasing their expectations from the Bank of England in May 2023 as inflations stayed high and the rates started increasing again. The Bank of England further increased the rates by 0.25% in August which are now expected to peak at around 5.75%.

However, just because the interest rates are at an all-time high, it does not mean that it is a bad time to remortgage.

Is it the right time to get a new fixed-rate mortgage?
According to The Times Money Mentor, one in four homeowners in the UK has variable-rate mortgages which include tracker and standard variable rate (SVR) mortgages. Naturally, an increase in the Bank of England base rate will push the rates on variable mortgages, making mortgage repayments unpredictable. While the cost of a mortgage is not the only factor a homeowner should focus on, it is important.

While no one can guarantee which direction the interest rates will go this year, it is safe to assume that they will increase slowly over time. This is because the high inflation rate of 6.8% may further increase the cost of borrowing across the country. Mortgage lenders often factor such predictions into the price of their mortgages.

So, if the fixed period of your existing mortgage deal is over, you may be up for a rocky ride for the rest of the year. It is advisable to remortgage your property by switching to a new mortgage deal (fixed or tracker which ever suits you) to prevent paying higher interest in the days to come.

Can remortgaging now save you money?
If you have reached the last six months of your current fixed-term mortgage deal, it is a good time to remortgage and look for a new deal to save more money.

Looking at the ongoing economic environment of the country, you cannot be sure about what the future has in store for you. Under such circumstances, remortgaging is the best way to play safe and prevent yourself from paying higher interest rates in the future. As long as you are not required to pay heft early repayment charges, you can switch your existing mortgage deal before moving to a standard variable rate (SVR).

How can a mortgage broker help under such circumstances?
While remortgaging can help you save a fortune you would have otherwise spent on paying a higher interest, it can get tricky for many borrowers. It is extremely important to do the math and plan your budget before switching to a new deal. Get an estimate of all the benefits you stand to receive and the expenses you need to incur while remortgaging your property. If the expenses overshadow the benefits, remortgaging may not be the best decision.

Working with a mortgage broker helps you make such decisions wisely. Being experienced professionals, mortgage brokers know the markets and guide you in taking the right steps. Should you stay on your existing lender’s standard variable rate? Should you look for a new deal with the same lender? Should you explore more options? A mortgage broker helps you answer such questions before you take any major steps toward remortgaging your property.

A skilled and experienced mortgage broker will also help you throughout the remortgage process, making sure you are on the right track.

Important things to do before remortgaging
If you are planning to escape the pitfalls of an unsteady and dynamic economic environment, make sure you take things slowly without rushing the remortgaging process.

Here are some of the most important things you should do before remortgaging your property:

• Look for the best and most experienced mortgage broker.
• Start planning at least six months before the fixed term of your
  existing deal expires.
• Improve your credit scores and keep track of your financial situation.
• Instead of focusing on the time you took your existing mortgage deal, see how much you can borrow according to your current earnings and affordability.
• Make sure there are no early repayment charges levied by your existing lender as you close the deal.
• Match the total expenses with the benefits you receive by remortgaging your property.

This is why it is advisable for homeowners to be mindful of the ongoing Bank of England base rate and current trends in the property markets across the country. If the interest rates are more likely to increase, remortgaging your property is the best way to safeguard your finances.