Homeowners are in need of help in this current economic environment. First, the pandemic took a toll on household budgets, then it was higher energy costs, inflation reached a 40 year high, and now interest rates are higher than they have been in over a decade. It should be noted that only over a year ago, interest rates were at historic lows from lenders, but now those cheap rates are long gone. In an effort to protect the household budget, experts are encouraging all homeowners to shop for a remortgage and that means putting aside any loyalty to the current lender in an effort to find the best deal.

The experts are most worried about those homeowners that are coming close to the end of their current mortgage deal. Many will have secured their current mortgage during the period in which the Bank of England’s Monetary Policy Committee (MPC) had lowered the standard base interest rate to almost zero at 0.1%. The first of ten consecutive MPC meetings to increase the rate occurred in December 2021. The February meeting resulted in the rate reaching 4.0%. There is a meeting only days away scheduled for 23 March.

Of course, 4% is the Bank’s rate. Lenders will be offering rates higher in order to cover costs of administering a loan and taking the risk of allowing the loan. The average rates seen before the MPC first increased the base rate in December 2021 was near 2%, and in the last few weeks interest rates on remortgages have ranged around 5%.

Homeowners should be aware there are many factors involved when a lender is choosing which deals are available to a borrower. With a remortgage, it is important that the homeowner is not in negative equity. It is also called being underwater with a mortgage. This occurs when the property value is below the debt of the property. With the threat of declining property values, this is a real concern for homeowners.

The LTV or loan to value will determine which deals are available to homeowners. The higher the property value in relation to the value of the loan will usually allow access to a loan and better interest rates whether it is a home purchase mortgage or a remortgage. A recent average of available interest rates with a 75% LTV, meaning the loan is only 75% of the value of the property, offered an average of 5.10% for a 2-year fixed rate remortgage.

It should be noted that the average standard variable rate was 7.23%. 

When a homeowner comes to the end of their mortgage term, if they do not take advantage of the opportunity to remortgage then they will be moved to their lender’s standard variable rate or SVR. Not only is a SVR normally higher than the rates available with a remortgage, but it is subject to further rate hikes. While the choice of a fixed rate remortgage could offer a lower interest rate and a fixed rate deal would lock in the rate level and shield the homeowner from future rate hikes during the duration of the new term.

It is suggested that all homeowners get reacquainted with their current mortgage. Be aware of the type of loan such as if the loan is a fixed deal or variable rate deal. Take note of when the mortgage term ends and of course, the current interest rate.

Then it is simple to start shopping for a remortgage online. Visiting the website of a remortgage lender will usually offer the ability to obtain a quick quote in a matter of minutes. Going to another remortgage lender allows a comparison of offers. It is even easier to obtain quotes to review and compare by visiting the website of a remortgage broker. Exclusive deals not offered directly from lenders are also possible with a remortgage broker.

No matter where a homeowner is in their current term, they should consider reviewing their current mortgage and consider shopping for a remortgage. This is especially true for those that have already come to the end of their term and have been moved to a more expensive and variable rate of their lender’s SVR. 

Some homeowners have taken on a penalty fee to end their term early to allow remortgaging with current rates rather than wait out their term and possibly pay higher rates. This isn’t the best choice for all homeowners, but for some it takes out the risk of allowing repayments to reach a level that is unaffordable and helps them avoid defaulting on their property loan.

The interest rates available in 2021 are gone and not likely to return. It is time to get acquainted with the higher rates currently offered, which still are lower than what used to be considered normal for a healthy economy. By remortgaging, a homeowner could put in place a strategy to save money from any further rate increases with a fixed rate choice and certainly save money when avoiding a higher rate SVR.

It's easy to shop online and obtain quotes and determine what opportunities and benefits are available with remortgaging. There is no commitment to obtain quotes, but the information could be all the motivation needed to get started on getting a remortgage deal that could be very helpful. Of course, it will mean pushing aside loyalty to the current lender and being open to setting up a new relationship with a different lender. It shouldn’t be hard to do if that lender offers a better remortgage deal and savings that makes it possible to protect the family household budget.