Why This Could Be the Right Time to Remortgage
While the cost of living crisis continues, many of us are looking at our outgoings to find opportunities to cut back. As one of the largest monthly costs in most household budgets, mortgages can be one area where it’s possible to make significant savings.
Remortgaging, where your existing mortgage is replaced by a new mortgage deal, can be a daunting prospect, but with our expert help, you can rest assured of finding the right solution for your individual circumstances.
If you’re unsure about remortgaging, here are some reasons why now may be the time to contact us to explore your options.
Remortgaging Can Save Thousands Each Year
Switching to a new mortgage deal could save you hundreds or even thousands of pounds each year compared to your existing deal, a financial boost which would be all the more welcome in the cost of living crisis.
When remortgaging, your new deal generally opens with a fixed rate period of a lower introductory interest rate, after which you will be transferred to your lender’s standard variable rate (SVR).
The Financial Conduct Authority (FCA) estimate that 800,000 UK homeowners are currently paying a higher interest rate than necessary by staying on their lender’s SVR instead of remortgaging. Financial website Moneyfacts.co.uk report that the average SVR currently stands at 7.12%, the first time it has been over 7% since October 2008.
As an example, a homeowner with 15 years left on a £150,000 repayment mortgage could be paying £1,358 each month on a typical SVR of 7.12%, but remortgaging to a new deal with a two year fixed rate of 4.26% would see that monthly payment fall to £1,129.
Interest Rates are Continuing to Rise
The recent era of low interest rates appears to be at an end. The Bank of England raised the base rate from 4% to 4.25% in March 2023, and many expect continued rises to combat inflation. As a result of the rising rates, numerous mortgage offers with attractive rates have been withdrawn from the market over the last year. The likelihood is that as rates continue to go up, the availability of low rate deals with continue to fall, making this a good time to consider a favourable offer.
A New Fixed Rate Period Brings Predictability to Your Outgoings
If you switch from the SVR offered by your current lender to a new fixed rate introductory offer, you can rest assured that your payments won’t rise for the length of that fixed rate period, which may run for two, five or even ten years in some cases. Fixing your mortgage payment offers some stability to your household budget, even as other costs may continue to rise.
It's important to note however that some tracker mortgages currently offer lower interest rates than fixed term deals, although these can rise and fall in line with the Bank of England base rate. Our Mortgage & Protection Advisor Ged Cumming can talk you through your options and can help you assess the pros and cons of each option and how they align with your personal risk appetite and overall financial priorities.
You May Have Acquired Enough Equity to Unlock Better Deals
If you have been making mortgage payments for some time, or if the housing market has led to a rise in the value of your home, it’s likely that you have built up more equity in your property than you had when you last took out a mortgage against it. This means you may qualify for more favourable rates than you may expect, due to the change in the loan-to-value ratio.
Lenders tend to offer better interest rates to homeowners who they see as a lower risk, and they calculate that those with higher equity in their home are better lending prospects. This means that, as an example, homeowners looking to remortgage for 50% of the value of their home may be offered a lower interest rate or better overall deal than those looking to remortgage for 60% or 80% of the value of their home.
Lenders are Introducing Stricter Affordability Checks
Every mortgage lender takes account of your overall spending when performing the affordability checks which determine what, if any, mortgage they are prepared to offer you. With the rising cost of living making an impact on available disposable income, many lenders are tightening up on these affordability checks. Already, Santander has announced changes to how they will calculate the amount they are willing to lend, and others are expected to follow suit.
With the likelihood that appealing mortgage offers may become harder to secure, this may be the time to remortgage.
The Experts Are in Your Corner
At McCrea, we are not tied to any lenders or products, meaning we can give you impartial, independent advice across the entire mortgage market. Our expert Mortgage advisor Ged Cumming can help you understand the conditions and costs associated with remortgaging, take on the burden of liaising with lenders and help you select the mortgage offer which meets your needs.
We can also guide you the less common mortgage types, including retirement interest only mortgages, lifetime mortgages and mortgages for older homeowners. From the best time to remortgage to whether you might benefit from using the resultant savings to overpay on your new mortgage, we’ll deliver tailored advice to help you master your mortgage. Why not get in touch today for a no-obligation chat?