The latest finance figures show that over 36,000 people have just remortgaged their home in a single month. It’s the highest number of people to do this in eight years.
The record figures are due to three factors:
- An unprecedented long period of low interest rates: The Bank of England has opted this August to hold interest rates at 0.25% as it delivered its inflation report and a rate decision on another so-called Super Thursday.
- A plethora of incredibly low remortgaging deals spawned by the current mortgage ‘war’ between lenders. Lenders need to drum up business. This is to counteract the current drop in first-time borrower mortgages and the shortage of homes on the market slowing activity.
- The fact that many people now have considerable equity in their homes and so are in a good position to leap on a more favourable remortgaging deal.
Remortgager’s have Never had it So Good
The number of people remortgaging reached 36,800 in July, up 7% on the previous month and 10% higher than a year ago, says UK Finance.
The association now collects the data that used to be delivered by the Council for Mortgage Lenders. It says that the increase in activity in July meant that, over the past year, the number of people remortgaging was at its highest since 2009. These 36,800 people remortgaged their homes to the tune of £6.7 billion; well in excess of the £5 billion first-time buyers borrowed.
Should You take Advantage of Rock-Bottom Remortgaging Rates?
You almost certainly should if you’re now looking at your account details and realising your current deal has ended. You’ll most likely have been moved to your lender’s SVR (standard variable rate) so you could do much better.
Inflation rates rose to 2.9% in August and the cost of living is now being squeezed. So remortgaging to a fixed rate would mean you’d probably reduce your monthly payments. You’d also be able to set them in stone so you have more control of your outgoings.
Your mortgage is the one outgoing you make that you can have some control over. Fixing it is actually a sensible ‘investment’ decision because it protects you long-term against inflation. To find out the financial sense behind this, see our guide here.
5 Solid Reasons to Remortgage
- You’ll get a better interest rate when your existing mortgage deal ends.
- If you’ve equity in your home you’re likely to get a better deal. Lenders award a better loan-to-value rate as the value in your home goes up.
- You could remortgage to a more flexible deal. Remember lenders are bending over backwards for your business now. You could swap to one that lets you make overpayments or take payment holidays
- You could remortagage to release cash from your home for some other big expense. This could be home improvements, a loft extension or a trip abroad.
- If your earning potential has gone up since you took out your original mortgage, you could perhaps make higher repayments at a lower rate and pay off your debt more quickly.
Decided to Remortgage?
Basically it now boils down to opting for either a fixed rate or a variable or tracker remortgage.
At this moment in time, opting for a fixed rate makes a lot of sense as interest rates are now likely at the lowest they’ll be for some considerable time.
A fix means you’re cushioned from any future rate rises and that you’ll know just how much will be leaving your bank account each month.
But do your calculations and take into account the arrangement fee your new lender may charge to give you the new deal. Very often though the fee can be worth paying.
Or should you go for a variable or tracker rate? These, right now, are likely to be more competitive than fixed rates.
A tracker rate follows or tracks the base rate so by definition they’re very low. But lenders are doing their best to compensate themselves by imposing higher fees so watch out for these.
Should You Go at it Alone?
How you go about remortgaging is up to you. Some people feel confident enough to navigate the best buy tables and do their sums. Others prefer a little help from a remortgaging advisor.
Remortgage advisors will study a range of mortgage products that are right for your circumstances. So you’ll not find you’ve been turned down by your chosen lenders because you didn’t understand the terms and conditions. They often do all the fiddly stuff such as the paperwork for you too, so your application will get put through faster.
If you do decide you could do with some remortgaging advice, we offer a comprehensive range of first charge mortgages (but not deals you can only get by going direct to a lender). Find out more here.