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Remortgage Sooner Rather Than Later Before Rates Rise

Remortgage Sooner Rather Than Later Before Rates Rise

Could it be true that rates are rising despite there were no increases to the standard base interest rate by the Bank of England’s Monetary Policy Committee (MPC)? The answer is yes. There was not a meeting scheduled for April, so the rate stayed as it was in March, voted 8-1 to keep the rate steady at the 16-year high of 5.25%. The next MPC meeting is on 9 May, and yet again there will probably be a vote to keep the same rate and no cut. Certainly, the odds are totally against there being a rate hike. For in March, the first time in two years, no member voted to increase the rate, while one voted to cut the rate.

So, why are mortgage rates and remortgage rates increasing? The simple answer is a lack of confidence in there being a rate cut soon. It had been forecasted the rate would decline by spring, and now there is an expectation it will not happen until autumn, and at the earliest possibly late summer, in August.

Also, as lenders survey the borrowing landscape there is more risk in lending when the rate is at a 16-year level high, inflation is still an issue and was at double digits last year putting strains on consumers, and there are still financial repercussions for some households due to the global pandemic. The political unrest globally, as well as the war in Ukraine and the fighting in Gaza could cause an issue unforeseen for the global financial market and that is a consideration. 

Some lenders are simply raising rates to correct the early cuts made at the first of the year. At one point, the competitive environment in lending due to the expectation of the MPC cutting the base rate sooner rather than later produced offers below the Bank’s standard base interest rate. It was unexpected, and it was an opportunity for borrowers. However, now those products are gone, at least most of them, and more are disappearing each day. 

This week rate increases on fixed rate deals were made by Halifax, HSBC, NatWest, TSB, and Virgin Money. Other lending institutions also made notice they were making increases to their rates. 

Not only are the factors mentioned above playing a role in rising rates, but so are swap rates. Swap rates are the rates charged between banks and building societies. They increased last week due to the less than expected decline in the latest inflation report. The twelve months to March, reported on 17 April, revealed a decline in inflation from 3.4% to 3.2%. However, there had been a forecast inflation would decline to 3.1%.

The target rate for inflation set by the Bank is 2.0%. While inflation is edging slowly toward target, it is still not responding as strongly as had been hoped to the 5.25% base rate.

The less than optimistic economic outlook for spring and summer is not the gloom and doom forecasts offered at times last year. It simply means borrowers have longer to wait for a cut from the MPC, and rates are rising which requires more thought and strategy from home buyers and homeowners.

Home buyers might find affordability to be an issue and will likely step back and save more for a deposit, or they will choose from less expensive homes than they once considered to be in their budget. Many first-time buyers are shopping for less in-demand homes in need of upgrading and improvements which are more affordable and require personal DIY projects.

Homeowners unable to step back from current rates will need to make their own choices due to the current lending environment. Many will be coming to the end of their mortgage term in the next few months, others due to have theirs end later in the year may not have to consider current remortgage deals yet. 

Experts encourage all homeowners to shop for a remortgage online. There will be those not yet ready for a remortgage, but they will be able to review offers and consider what today’s lending rates would mean for their repayment amounts and be prepared. Those needing a remortgage in weeks, or a few months, should shop soon to be able to choose from rates before they might edge upwards due to swap rates or other influences.

Homeowners coming off a mortgage term acquired in 2022 as a two-year fixed rate will not find savings opportunities by choosing a lower rate than the one they had. Remortgage rates of now are reflective of the base rate of 5.25%, while the base rate in April 2022 was only 0.75%. Finding a rate lower than those in 2022 is not a possibility, however savings can be found by choosing a remortgage rather than letting a lender transition the loan to their standard variable rate or SVR when the term expires. 

A remortgage is likely going to offer the lower rate, and possibly much lower than a SVR. Shopping for a remortgage is helpful for any homeowner, but certainly those already on a SVR or those considering skipping a remortgage. A homeowner seeking to keep as much money as possible in their household budget are encouraged to shop for a remortgage. 

Shopping online for a new deal is fast and easy. Remortgage brokers offer quotes from a variety of lenders and often have exclusive deals. Homeowners can also go to websites of individual lenders one by one to gather quotes. 

In reviewing and comparing remortgage quotes, homeowners can consider their options and the opportunities available. Knowing the best offers are slipping away and it might be a while before rates lower again is motivation for any borrower to shop for a deal soon. 

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