Is it time to remortgage whilst rates are still low?
With the monthly mortgage payment representing a major chunk of the average family budget, it can make sense to shop around from time to time to see if there’s a better, more cost-efficient mortgage deal available to you. According to the Council of Mortgage Lenders1 , around 36,000 people remortgaged in November alone, up 13% on the year before.
In some cases, homeowners can save hundreds of pounds a year by moving to a more attractive rate with a different lender. Remortgaging can work if your property has increased in value and you want to free up some cash from the equity tied up in your home, or if you want to make higher repayments to shorten your mortgage term. Remortgaging can also be arranged to finance home improvements, to fund the purchase of an investment property or to buy out a joint owners’ share of a property.
If you’re currently nearing the end of your existing deal, then this could be a good time to remortgage. Interest rates are currently at an all-time low, and lenders are continuing to offer competitive deals.
Why remortgaging can make sense
When your fixed-rate deal ends, your lender will automatically move your mortgage on to their Standard Variable Rate (SVR), which as the name suggests can rise and fall. This SVR rate is likely to be less attractive than the rate you were previously on, and can be increased at any time, irrespective of what happens to the Bank of England’s base rate, which is currently 0.25%. So, shopping around before your deal ends could save you money.
Putting the cash to good use
Research from TSB2 shows that by remortgaging to a lower fixed rate, homeowners can free up cash for a variety of other uses. Over a third (37%) planned to use the extra money to overpay their mortgage, helping them to become mortgage-free faster, while 30% intended to use the cash to carry out major renovation projects like a loft conversion or an extension.
1 Council of Mortgage Lenders, Jan 2017
2 TSB, Jan 2017