Looking at a Long-Term Remortgage Fix? Why the Underlying SVR still Applies to You
Eight in 10 mortgage shoppers are currently considering them. They are looking for low, fixed monthly payments to control their outgoings and keep track of their finances.
Five-year remortgaging fixes are currently the hottest product for borrowers in 2019.
They have rocketed in popularity since 2018. This has driven up competition between lenders and pushing down costs.
Their appeal has been linked to homeowners seeking security in the face of the economic uncertainty Brexit has brought.
Fixed Remortgages are in High demand
Fixed products are doubly attractive right now. The gap between two and five-year fixes has shrunk to the smallest margin in seven years.
So if you’re fixing for the long term, should you worry about your lender’s SVR (standard variable rate) at all?
The SVR is the standard mortgage interest rate that you’re most likely to go onto. This would happen after you finished your introductory fixed, tracker or discounted deal.
You would have little cause for concern if you’re fixing for the very long-term. Some lenders are even now offering 15-year fixed remortgage products. (But you would need to be very sure of your circumstances not changing if you were to opt for this duration.)
Reasons to Avoid the SVR Trap
So when should you worry about the SVR if you have chosen a fixed-term product?
The reason you should take note of your lender’s SVR is because they vary between providers.
Some mortgage providers currently have SVRs of over 6%. Others are at 4%. That’s a 2% difference that could make a big difference to your outgoings.
Of course, this would only be relevant to you if your fixed product were to come to an end. And you then found it difficult to remortgage.
Changing Circumstances Changes your Options
But people’s circumstances do change. The classic example is of a homebuyer taking out a two-year fixed remortgage who decides to become self-employed one year in.
As lenders expect the self-employed to have up to three years of accounts, that homebuyer could find his hands tied.
Other possible scenarios are that you could become unemployed. Your credit history could turn against you. You could be impacted by a slump in the housing market whereby your loan to value changes.
In these cases, you could find remortgaging difficult. You could discover that the best rates are no longer available to you.
Right now, interest rates are at near historical lows. Few of us remember clearly the early 1990s when they were at 15%!
So if you’re considering taking out a fixed remortgage, it’s worth looking at your SVR.
Always think how you would cope if you found you had slipped and got stuck onto it!
Do you need help from a remortgaging advisor who’ll sit down with you to answer all of your questions and walk you through the process? To have an informal talk about your options, we’ll give you personalised, impartial advice on your remortgage if you would like to contact us here.
