Every homeowner was once a first-time home buyer. For many the journey from considering the idea of climbing on the property ladder to years of homeownership is a complete unknown. There might be friends and family to ask for advice, but the housing market of today is much different than just ten years ago. Advice from then might not translate well for current buying conditions. There are so many decisions to make in shopping for a property and then comes shopping for a mortgage and a lender. Once the mortgage is secured and the property keys in hand, a new first-time home buyer should be able to take a deep breath, exhale, and leave all the stress of borrowing behind. Make the repayments on time and all will be good. However, the first mortgage is not likely to be the end of a homeowner’s relationship with borrowing and lenders.

Perhaps one of the least discussed pieces of advice for first time home buyers or new homeowners is what will happen when the mortgage term ends. Currently the most popular mortgage products are trackers and fixed rate deals. In fixed rate deals the most popular are those with two- and five-year terms. 

The tracker is becoming popular due to the fact that there are expectations the Bank of England’s Monetary Policy Committee (MPC) will be lowering the standard base interest rate this year. It should be noted that forecasts can completely change. It might happen, it might not. At the start of the year there were forecasts for an early spring cut to the rate and possibly three minor rate cuts by the end of the year. Now, the forecasts are less optimistic, and they have changed to a late summer first cut to the current base rate and possibly two cuts by the end of year.

There are always unknowns that could impact the forecasts and there are many unknown factors that could quickly cause an economic impact. The unrest in the global economy, the cost of global swap rates between banks and lending institutions, the War in Ukraine, and the fighting in Gaza. Elections can have an impact on the economy as well. These and other factors can delay or bring about earlier changes to the current base rate.

The MPC has held the rate steady at 5.25% during each 2024 meeting held so far. There was not a scheduled meeting for April and the next is only days away on 9 May. Inflation has not declined as steeply as hoped and the rate will likely be held steady once more. 

The tracker mortgage is a desirable choice when rates are affordably low and are expected to decline or at least remain low. Since it is a loan attached to the Bank’s rate, which contributes to the name tracker, it should be well thought out before choosing it. If the base rate increases, the homeowner’s repayments will increase. For instance, the base rate of the Bank was only 0.75% in April 2022, and two years later it increased to 5.25%. Things can look vastly different from one year to the next if one has a tracker or variable loan.

Having easily budgeted repayments that are the same month after month no matter what happens with the base rate is why fixed rates are popular. They do not change once they are secured. Only when the homeowner’s term ends will the deal end, and the homeowner will have to make yet another borrowing choice.

No matter what type of mortgage loan chosen, there is a term connected to it. When the term ends, the deal expires. It is then the homeowner finds it is again to time to borrow. A remortgage is the term for when a homeowner secures a new deal, and because lenders want new customers, remortgages are normally incredibly attractive in relation to the other option for a homeowner, which is allowing the lender to move their loan to the lender’s standard variable rate or SVR.

Remortgages are normally lower than a SVR, and it could be substantially lower. Avoiding a risky SVR could keep the homeowner from paying more than necessary. Remortgaging rather than accepting a SVR also offers the ability to choose a steadier loan type such as a fixed rate deal. 

Experts have cautioned homeowners at the end of their term or nearing it to not wait out lower lender rates while sitting on a SVR. Lenders are not expected to dramatically lower their offers once the MPC votes for a cut. Nor will the base rate reach levels seen just two years ago.

Shopping online for a remortgage is easy and fast. No matter where a homeowner is in their term they can easily shop and determine what offers are available. This is most helpful to avoid a SVR, to prepare for a term near the expiration date, or to start planning a strategy should rates increase or be much higher than the homeowner is now paying. 

Shopping online with a remortgage broker could quickly put numerous quotes in hand to review and compare and a broker might offer an exclusive deal from a lender not offered directly to borrowers. Going from website to website of remortgage lenders is also an option to gather quotes.

Until one owns their home fully, with no debt from a mortgage loan, a borrowing choice will likely happen numerous times. It is not something to be stressed about or dreaded, for there are many advantages such as discovering savings by avoiding a SVR, possibly finding a lower rate if they drop below the current rate being paid, and some choose to cash out built up equity with an equity cash release remortgage to have money in hand for upgrades and improvements, to pay for an important expense, or simply to fund a holiday. 

The first mortgage choice will not likely be the last, and understanding about a remortgage and shopping occasionally to determine the state of the lending market is a smart strategy. Then when a term is ending, shopping for a remortgage will be familiar and a homeowner will make the most of remortgage benefits and opportunities to save money and secure their financial future.