When it comes to paying interest rates, other than business owners, perhaps the most likely impacted are homeowners and home buyers. Property is expensive. Buying a home could be the most expensive item ever purchased, other than perhaps another home. Interest rates matter because borrowing the funds to buy a home costs money. The interest rate on a mortgage is much like the interest rate on a credit card. The higher the interest rate, the more it is going to cost to borrow, and the more it is going to cost overall to pay down the debt.

Currently interest rates are low. The pandemic hurt the economy and the long term viewpoint was that it would be bad as months went by, so the Bank of England stepped in and cut the standard base rate to an historic low. That rate still stands and we are closing in on it being steady for almost a year. In over 300 years, the entire history of the Bank, the rate has never been lower and now stands at 0.1%.

When rates are low it helps consumers that can benefit by borrowing cheaply, and it could help some that are already in debt from prior borrowing such as homeowners. 

When a homeowner’s current mortgage term ends, they have a choice to allow their lender to move them onto their fluctuating and at times risky standard variable rate (SVR) or remortgage. For some, the SVR could currently be lower than the rate they were paying on their previous mortgage. However, a SVR could rise unexpectedly and cause the homeowner to rush to remortgage to not get in financial trouble.

It could be easy to believe the rate will stay this low for some time as the pandemic comes under control and disappears. However, there are signs that lenders are becoming weary of the low cost which relates to low profits. That could mean the costs could be passed onto new customers or it could be passed on to homeowners on a SVR. It could also translate to tighter restrictions in borrowing to lessen the risk involved in lending.

Remortgaging, especially to a fixed rate, could be the answer to take advantage of the current low interest rates available and to protect one’s household budget from unexpected major expenses such as an increased SVR would cause.

A recent study revealed that homeowners remortgaging could find interest rates offering a substantial savings. SVRs from the top lenders averaged to be double or more that of the interest rates offered with remortgages. 

No one should or needs to pay more than necessary. Discovering what savings could be found is easy to do online. Most remortgage lenders and remortgage brokers offer quotes of possible remortgages for homeowners answering a few questions about their present mortgage.

Homeowners need to be concerned about rising interest rates. The process takes time and planning ahead means getting the benefit of savings sooner and preparing ahead against paying more.