Homeowners Might Consider Paying Penalty Fee to Remortgage Now

Homeowners Might Consider Paying Penalty Fee to Remortgage Now

The outlook on the housing market is very different than it was this time last year. The standard base rate of the Bank of England was at an all-time 300 plus year low of 0.1%. Home buyers were showing strong demand even though asking prices were breaking records month after month. Despite the higher asking prices associated with properties for sale, the cost of borrowing was so cheap it kept home buyers interested and motivated. 

Inflation was on the rise in the last half of the year at a pace that was causing attention and raising warnings of the possibility of the Bank of England’s Monetary Policy Committee (MPC) increasing the base rate. It was expected that in the first quarter of 2022 there could be a possible rate hike, but it happened in December 2021.

Since December, there has been a rate hike at every meeting of the MPC. All of the last five meetings have had a majority vote for hiking the rate. It now sits at 1.25%. 

It should be noted that it is now at a level that has not been seen in over a decade. This means that many homeowners have never had repayments at this interest rate level. They have enjoyed lower interest rates and could be surprised at how quickly they are facing higher repayments and a strain to their budgets.

This would certainly be the case for those homeowners that allowed their mortgage term to end and were moved to their lender’s standard variable rate (SVR). Their lender will likely take rapid action with each MPC rate hike and the homeowner could be paying more than necessary.

Remortgage interest rates available now could be much lower than a SVR. In some cases, a remortgage could offer an interest rate half the rate level of a SVR. Rather than paying more than needed, a remortgage could save money.

There are also other benefits to remortgaging besides saving money on each and every repayment. Some homeowners are choosing fixed rate remortgages. It locks in the interest rate and protects the homeowner from any rate hikes during the term. Others are cashing out their built up equity to get money in hand. The cash could be used for any purchase or need of the homeowner, such as debt consolidation, upgrading and improvements to the home, building an emergency fund, or even a holiday.

The opportunity is so important to some homeowners that they are choosing to remortgage early. Rather than wait out until the end of their mortgage term, they are choosing to end their deal long before it expires. It provides the opportunity to choose from interest rate offers of today rather than possible higher ones in the weeks or months ahead. 

Ending a remortgage early often will involve penalty fees. Therefore the cost should be taken into consideration when choosing a remortgage deal or even whether to remortgage or not.

Experts encourage all homeowners to shop for a remortgage no matter where they are in their term. It is quick and easy to get quotes online from lenders or to do a one stop shopping event by visiting a remortgage broker and getting quotes from various lenders at one time. With quotes in hand, a homeowner could determine what remortgage opportunities are available so they can review and make a choice. 

Shopping for a remortgage could be a very smart strategy for any homeowner, whether they have had their mortgage term end already, are close to doing so, or even for those with months to wait before their term ends. For experts warn that more interest rate hikes are ahead, and by considering remortgage offers currently available it could offer a greater savings and benefit than waiting when the rates are higher.

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