For anyone looking at getting a fixed remortgage deal, the clock is ticking on the current choice of low-rate products.
Mortgage experts are warning that homeowners should take action fast. Rates for fixed remortgage deals and other products are expected to rise in the coming months.
The logic behind this advice is the imminent rise to the base rate by the Bank of England.
The base rate is low right now due to the policy of quantitative easing. But with inflation building so is the pressure on the Bank of England to hike interest rates. The result? More expensive remortgages.
Many financial experts suspect that the base rate could increase two to three times during 2018. If the trend continues across 2019, then it will reach 2% by the end of the two-year period.
Base Rate Impact on Fixed Remortgage Deals
Right now, there’s still intense competition among lenders. So there’s a good choice of low rate fixed remortgage deals available.
But lenders are all watching the predictions closely too. The cost of funds to lenders has been increasing. If the market forecasts a base rate rise in May, the cost of these funds will continue upwards.
This will impact on the choice of fixed rates on offer as lenders build the cost into their products. And not to the benefit of the homeowner.
So if your current deal is approaching its end, it’s worth doing your research now. Consider putting in your application to remortgage. Most lenders will make their offer valid for six months.
The majority of best-deal mortgages are set for a limited time – often two to five years. This is the usual period offered on a fixed rate, tracker or discount mortgage.
When it comes to term, you will be moved to your lender’s standard variable rate (SVR). It’s likely to be more expensive than your previous interest rate. It will almost certainly be higher than that of the best buys available.
Long-Term Security with Fixed Remortgage Deals
A fixed-rate mortgage offers security because it gives you a guaranteed interest rate for a fixed period time. That means you can be sure your monthly repayments will stay the same until the fix ends.
Property owners who are in a position to switch their mortgage to a safe fixed rate have been responding fast in the past year.
From December 2016 to December 2017, the number of remortgages grew by 41% year-on year.
Demand for five-year fixed products has risen too, making up 46% of recent remortgages. That’s double the 23% market share seen in December 2016.
With a further base rise forecast, it’s doubtful that homeowners’ interest in remortgaging – and the security of a longer-term fix – will let up anytime soon.
Remortgage Sooner Rather than Later …
However, the era of ‘ultra cheap money’ is coming to an end, says www.propertyreporter.co.uk.
Rates are creeping up already. With the likelihood of further base rate rises ahead, be prepared. Homeowners hoping to lock into a long-term deal will need to look a little harder to get security over their repayments.
Moneyfacts.co.uk says that average rates on 10-year fixed-rate mortgages too have begun to increase from an all-time low.
It says that today the average 10-year fixed mortgage rate stands at 3.05%, which is up 0.09% from the start of February.
That’s why anyone looking to remortgage to any kind of lower mortgage rate should make haste. And keep an eye on the next base rate rise predictions for as early as May.
If you’re considering a 5- or 10-year fixed mortgage, you’ll need to be sure that your circumstances are stable. If you did need to rearrange your deal, the redemption charges that go with most longer-term fixed remortgage deals can be high.
So should you fix your remortgage? Here’s the advice of Moneysavingexpert.com. “Deciding whether to fix is about weighing up how important it is to you that your repayments will stay the same. If you can only just afford your mortgage repayments, you probably should not be gambling with interest rates. You’ll more likely benefit from a fixed rate.”
Whether you decide to fix or not is down to your personal situation. But one thing’s for sure. Fixing your mortgage costs going forward is going to become more expensive.
If you’d like advice on finding the most cost-effective product for remortgaging for your circumstances, you can get in touch with us here.