New research from UK Finance shows that remortgaging has surged to the highest levels seen in almost a decade.
We’re now a decade on from the financial crisis. In that time, average mortgage rates have almost halved.
Greater competition between lenders has given rise to a greater availability of competitive deals and remortgaging savings.
This soar in product availability has in turn prompted more borrowers to move up the housing ladder.
“It would have been difficult to predict 10 years ago that we would ever see mortgage rates at historic lows. Product numbers are at record highs. Providers are now vying to compete for new business across most LTV tiers,” said Darren Cook, finance expert at Moneyfacts.
All this said, it’s important to note that lenders are more careful about whom they lend to today. The Financial Conduct Authority introduced clear affordability measures in 2014. Mortgage providers have to follow these by law.
This means lending criteria is stricter than it was before the financial crisis. Lenders have to look at your income and outgoings. Then they have to make sure you can afford your repayments both now and if rates rise in the future.
That said, it’s still possible for many people to take advantage of today’s low mortgage rates and make huge savings.
Remortgaging may cut your bills by thousands of pounds a year.
So Why Might You Want to Remortgage?
Consider it if:
- You’re nearing the end of your current deal. Don’t hesitate if the introductory period on your fixed-rate mortgage is nigh. You’ll almost certainly save money if you switch before you’re downgraded to your lender’s standard variable rate (SVR). The average SVR is 4.9% so failing to remortgage could cost you thousands more in the long run.
- You’ve built up sizeable equity in your property. Usually as you repay your mortgage, you’re slowing accruing equity in your home. Once yours is enough, you should be able to remortgage at a lower loan-to-value (LTV) tier than your original loan. That will mean you’ll be eligible for a bigger choice of cheaper remortgaging deals.
- You realise you need different options with your remortgaging deal. Perhaps your personal circumstances have changed. You might now want a longer-term fix for rate security. You might want a mortgage where you can make overpayments because you’ve inherited money or are earning more.
- You need to free up cash for other purposes. Remortgaging can allow you to release some of the cash you’ve built up in your home. You can then use it to fund home improvements, a loan or gift to a family member, or for a dream holiday. With the current low rate landscape, you may even be able to do this without increasing your repayments, though this could mean you pay more in interest over the term of the mortgage.
- You’re worried about the economic uncertainty surrounding Brexit. Or suspect more base rate hikes are on the horizon. If you’re on a variable-rate mortgage – such as a discount or tracker – this would mean your payments would soar. You might prefer the peace of mind of a fixed-rate remortgage.
Are You Floundering on a SVR?
If you’ve let yourself slip onto your lender’s SVR, taking action now is a non-brainer.
Research by Which? shows this: homeowners on SVRs could be paying as much as £4,000 a year more than they would if they remortgaged to the cheapest available equivalent deal.
The study revealed that a homeowner with an average-priced property could face bills of £347 more every month. This is simply by failing to remortgage before dropping on to their lender’s SVR.
Don’t Wait to Apply
Finally, remember that there’s no reason to wait until the cliff edge of your fixed period to apply for a new mortgage.
You can do your research in advance. Many lenders will give you a quote and then allow you to lock into a new deal six months ahead of time.