Homeowners have a variety of remortgage products available to choose between from lenders and brokers. The competition for borrowers has led to lower interest rates and creative offers to gain their attention. In just the past weeks, more and more deals at 1% or less interest rates have come available. It would seem the choice would be straightforward as to which deal should be chosen, but there could be much confusion, especially between the choice of a fixed rate deal or one with a variable interest rate. 

Right away when one studies the remortgage offers from lenders and brokers, it is usual to see that the lower interest rates with longer terms are connected to variable rates. Fixed rate deals often have shorter terms attached and slightly higher interest rates. It is this way so that the lender risks less in lending to the borrower.

The interest rate determines the cost of borrowing. The lower the interest rate the less it costs the borrower to pay back the money. If the rate is set as in a fixed rate deal, then the borrower will only pay a specific amount to borrow, but if the rate could possibly increase then the lender could make more money from lending which can happen in a variable rate.

The variable rate normally will fluctuate based on the Bank of England’s standard base rate. If the rates go up then the borrower pays more, but if the rate lowers then the borrower will pay less.

In some instances, it could be a good choice to choose a variable rate. Of course, it is a risk as to if the Bank’s rate will rise or fall during the term of the deal. The risk might not be good for a household budget that could not handle rising rates. Even a slight interest rate increase could cost hundreds per month for some homeowners. 

Lenders and brokers could certainly convey information as to what the repayment overall or monthly would be with increases in the rate. Fractional interest rate increases could make a dramatic difference in what outgoing expenses could be on a property loan.

The fixed rate is set and does not change for the term of the deal. Because it is fixed and will not fluctuate, it often will be offered with terms over less time than what could be found with a variable rate. This kind of deal is good for a household budget that is more comfortable with a known and set amount that will not increase over the term.

The loss of risk in a fixed rate opposed to a variable rate is that if rates decrease, or even plummet as they have with the pandemic, the homeowner will be paying more on their fixed rate than they likely would have had it been a variable rate deal.

There is a choice for homeowners beyond the interest rate or the term. Choosing a fixed or variable rate will determine the length of terms offered in deals, and the level of low interest rates available. The choice also determines the level of risk the homeowner is willing to take should interest rates rise or fall. Fees should be considered as well in a remortgage, as higher fees are often associated with the lowest interest rate deals.  

A simple way to start shopping for a remortgage is to do so online. Variable and fixed deals, in various lengths of terms and interest rates will be offered in quotes. Comparing the offers and choosing to take a risk or not to obtain a lower rate, longer term, and the opportunity to possibly save if rates drop can be reviewed. Many choose variable rates and many choose fixed rates. Some homeowners opt for the very lowest interest rate with higher fees while others choose a deal with less costly fees. Some homeowners count on rates being low for years to come and feel comfortable with a variable rate and others expect them to rise and choose to lock in a low rate deal as a safety net.

Homeowners have different needs in a remortgage, and luckily there are many to choose from to find the best remortgage deal. Shopping for online quotes will get a curious homeowner information to review to determine what offers are available and where savings or other benefits in remortgaging could be discovered. It is no secret that remortgaging is in high demand right now, and the ability to save money is a top reason, whether it is a variable rate or a fixed rate remortgage that is chosen.