Priority Strategy for Savings Should be Remortgage or Mortgage Shopping Now

Priority Strategy for Savings Should be Remortgage or Mortgage Shopping Now

For the third consecutive month through June, the UK housing market has been subdued according to Halifax. Home buyers have stepped away from homeownership at the moment. There are specific factors at play such as elevated asking prices that have remained following record-breaking highs month after month that occurred during the pandemic when borrowing was historically cheap. Also, the more expensive interest rates from lenders, which though could be viewed as below normal, are much higher than what were available during the pandemic. There is also a lower supply of properties available which makes buyers competitive and shuts out those who find the higher prices and costlier interest rates a barrier to affordability. 

There could also be a wait and see strategy at play with buyers who are expecting lower interest rates to be released once the Bank of England’s Monetary Policy Committee (MPC) votes to cut the standard base interest rate for the first time since March 2020. It was then the base rate was cut in response to the global pandemic to an all-time historic low of almost zero at 0.1%. In December 2021, the rate began its way upward when the MPC voted to more than double it to 0.25% due to inflation growth.

Every consecutive meeting following until August 2023 the MPC increased the rate until it reached 5.25% where it still stands. September 2023 through to last month in June, the MPC voted to hold the rate steady to allow it to work to tame inflation. The inflation rate was indeed tamed as it finally reached 2.0%, the target rate set by the Bank. 

Because the inflation rate has finally reached its target, there is an anticipation the MPC is going to let go of the peak rate that took inflation down and make a cut to the long standing 5.25%. The next opportunity is 1 August. The optimism of a rate reduction weeks away comes after a letdown earlier in the year.

The first cut to the base rate was expected in early spring but was pushed forward as inflation remained stubborn. Optimism had grown and then fizzled. It brought about lower interest rates, only to see them disappear when the MPC was forced to keep the current rate steady.

Now, with inflation at target, and the next report due 17 July hopefully solidifying that inflation is within the confines of where the Bank needs it to stay, a reduction to the base rate will happen at the start of August. There could always be a cautious vote by the MPC should there be a reason to hold the rate steady such as any wavering of inflation remaining at target, or if there is a specific sector that is causing worry such as energy or the service sector.

It is the uncertainty that home buyers should consider when shopping the market or considering current lender rates. The optimism for a rate cut in August is greater than the cautious outlook of maybe not until September. This has triggered a competitive market in lending for the attention of buyers, yet it is not guaranteed to last.

Mortgage rates might not be at the level of a few years ago, but those on the market now are better than only months ago and are reflective of a MPC vote to cut the base rate which has yet to happen. For if the MPC does vote for a cut it is expected to be 0.25% taking the Bank’s rate to 5.0%. Shopping around the current offers for first time buyers, home movers, and landlords at the start of July could look quite different than at the start of June. 

The same opportunity exists for homeowners shopping remortgages. Lenders have lowered their interest rates to grab the attention of borrowers looking to get a new deal now without waiting on the MPC. There are incredibly attractive deals to be found fulfilling even unique remortgage needs such as over 100% remortgages for homeowners in negative equity or those looking to do major upgrades or improvements to their property shopping for an equity cash release deal. Interest-free remortgages and those with longer terms are also offered. Of course, the ever-popular fixed rate remortgage is an option.

Choosing a remortgage at the end of a homeowner’s term offers savings over skipping a remortgage and being moved to the lender’s standard variable rate (SVR) which could be double or more the rates of what could be found with a remortgage. 

Knowing the current already discounted rates by lenders are available is motivation to shop now for the best remortgage, or mortgage deal. Those available now will likely be competitive and offered as a showcase offer prior to the next MPC meeting. If the rate cut is put off until September, the best deals could be pulled rapidly and might not return until the second cut occurs, maybe this year or later.

There might be even lower deals by some lenders if the base rate is reduced next month, but other lenders have already put their deals out for consideration which makes shopping for a deal a smart priority strategy for homeowners and home buyers.

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