Many homeowners are unaware of how a remortgage could benefit their household budget. Inflation is putting a hardship on consumers and to control the rising inflation rate, which is currently more than three times the level of the target set by the Bank of England, the Monetary Policy Committee (MPC) increases the standard base interest rate. Paying on loans with higher interest rates increases the cost of borrowing. For homeowners, due to the high amount of borrowing, paying a higher interest rate could be a hard hit to one’s budget.

The interest rate determines the cost of borrowing. When the loan, such as a home mortgage, is attached to a low interest rate, the overall cost of the loan is lower than it would be with a higher interest rate. This is why when borrowing any amount the interest rate matters.

Homeowners have a unique opportunity to remortgage and benefit from discovering a lower interest rate than first obtained with their initial mortgage. When their mortgage term ends they have the ability to remortgage or to allow their lender to move their loan to their standard variable rate (SVR). 

A SVR could be a risky situation for those on a set budget. The interest rate can fluctuate and do so quickly causing a homeowner to have to pay higher rates should the lender increase the rate. At times when rates are declining, so likely will the homeowner’s SVR. There are unique times when the risk of a SVR could be a chance worth taking, but not when rates are likely to increase.

Rather than face higher interest rates and pay more than necessary a remortgage could offer relief. Shopping for a lower interest rate through remortgaging is an opportunity for any homeowner. Experts encourage any homeowner to shop for a remortgage and determine if savings are possible. Homeowners that have been moved to a SVR or are close to having their mortgage deal end should consider shopping for a remortgage.

Even homeowners not close to having their mortgage deal end should shop for a remortgage. Though they may decide to wait until closer to their term ending, they could determine if it would be a smart strategy to pay a penalty fee to end the term early to secure a lower interest rate now rather than face higher rates when their term ends.

As in times like the present when interest rates are rising, a homeowner could not only choose to remortgage but to secure a fixed rate deal. The interest rate would then be locked in for the term of the deal and would protect against rising rates. The longer the term, the longer the rate is locked in.

So far, the last three consecutive MPC meetings have resulted in rate increases. The next MPC meeting is on 5 May and could result in yet another rate hike. There is still time to take advantage of the rates available currently through remortgaging. Waiting on the fence rather than taking action now could have a homeowner with no choice but to pay more than would have been necessary had they remortgaged earlier.