It’s easy to take the ‘I just can’t be bothered’ attitude to remortgaging. Remortgaging can seem stressful and complex.
Granted, the thought of the hassle and the possible fees can be off-putting. But, in fact, remortgaging is much more straightforward than getting a mortgage. You don’t have a property sale to deal with and so there’s far less paperwork and effort for you.
So, if your circumstances are such that it makes sense for you to remortgage, here’s why you should. And why you should put in your remortgage application sooner rather than later.
Why should You Remortgage?
But first, in what situation might it be wise for you to remortgage now? It could be any of these:
You’re nearing or have already hit the end of your introductory offer or your fixed or discounted rate. This means you can expect your mortgage outgoings to go up as you move on to your lender’s more costly SVR (standard variable rate). Falling into the SVR trap is never a good idea. Recent research looked at a borrower with a typical loan of £173,677. The report stated: “If they sat on their lender’s SVR for six months or more, paying an average rate of 4.39%, they would pay £7,549 in annual interest. But, by switching to a two-year fixed-rate deal at 1.76%, they would pay £3,102 per year in interest. That’s a difference of more than £4,000.” To put this in context, if this borrower remained on this SVR for the full 25-year term of their loan they would pay £112,686 in total interest, which represents 65% of their original loan.
You’re sitting on a lot of equity in your home. If the value of your home has increased since you took out your mortgage, the chances are you’re now in a lower loan-to-value band. That means you’re eligible for lower rates and will have plenty of remortgaging choice.
You’d like to have the free cash to do or buy something. Do you have equity in your property? Then you’re in a position to get the benefit of the current low rates to liberate funds from the value of your property. You may find you can do this without increasing your outgoings. This is down to the historically low deals now available. Perhaps you’d like to finance a new kitchen or an extension.
Uncertainty is the Only Certainty Right Now
Brexit is unsettling. Change is in the air. Whether we voted to Leave or Remain, we all have to acknowledge that Brexit is already having an impact on the economy.
No one knows what will happen. Some experts have predicted that there will be a property crash. A warning by the governor of the Bank of England, Mark Carney, that a disruptive no-deal Brexit could wipe 35% off house prices, has worried many.
Certainly the average UK house price fell by £5,222 or 1.7% this November, according to Rightmove. The main reason for a significant drop in house prices is an increase in mortgage rates. These are forecast if there is more turbulent financial uncertainty.
Remortgaging LTV’s (loans-to-value) are also set to nose dive if all the forecasts of a UK housing market recession turn out to be correct.
Others say a property crash is unlikely due to supply and demand. The UK population is increasing while the supply of new homes is behind most projections for what is needed.
Which Way will Interest Rates Go?
The other longer-term risk to be aware of in terms of remortgaging is interest rates. If the Bank of England increases the base rate much above 3% (it is now at 0.75%) then it could hit the property market, and the economy, hard.
For now the Bank of England has said it is monitoring economic data to decide when it will next adjust interest rates. But the latest interest rate rise suggests it is likely to be upwards, rather than downwards.
Many people are reacting by taking advantage of some of the historically low remortgaging deals available (for now).
They’re fixing their remortgages for a longer period than the typical two years.
The latest statistics from Moneyfacts.co.uk show that the number of 10-year fixed rate mortgage deals available has skyrocketed in the last year. The average rate available on these products has dropped too.
Certainly a five-year or even a ten-year fix will give you certainty on your monthly payments. The rate will be a little higher than a two-year fix. Essentially you are paying a little extra as insurance against interest rates rocketing.
For many people looking at remortgaging, this security is well worth having.
If you need help in finding the right remortgaging product for you, we’ll be happy to help you here.