When interest rates began to rise and the housing market began to slow, homeowners were warned of the possibility of their slipping into negative equity. Doing so would put a remortgage out of reach and with higher interest rates in place not being able to remortgage could be tragic for some homeowners. Affordability issues could arise as a homeowner becomes a prisoner of their mortgage and are at the mercy of higher interest rates.

When a homeowner comes to the end of their mortgage term, they have the choice to remortgage or allow their lender to transition their loan to the lender’s standard variable rate (SVR). Remortgage interest rate offers are generally lower than a SVR, and therefore the better choice. Also, with a remortgage the homeowner could choose a fixed rate deal, which is not possible with the lender’s SVR. 

The majority of homeowners will choose to remortgage after their term ends, though many do so earlier to take advantage of current lender offers. Most homeowners will be capable of remortgaging up to six months before the end of their term without a penalty fee for remortgaging before the expiration date. However, it is not unusual for homeowners to take on a penalty fee to take advantage of the current offers to save money with a lower rate or to secure financial security if rates are rising.

The benefits of remortgaging are not available to homeowners who decline into negative equity and when house prices are falling homeowners could be in danger. Negative equity occurs when the value of a home falls below the debt of the property. Property value decline could come about through various situations, and one is when house prices began to fall. 

Currently the housing market is on a fine line. Some reports reveal a slight average house price increase, but the reports are concentrated on perhaps that home builder or lender’s own data. The price increases are certainly not reflective of the housing market when interest rates were historically low, but even with small growth it is optimistic there exists a resilient market which is good for the overall economy.

The deeper and fuller glimpse of the UK housing market comes with the official data release of the market by the Office for National Statistics (ONS) as it involves mortgage lending and cash purchases. The ONS reported for year on year in December 2023 an average house price decline of 1.4%. This follows the previous decline in November of 2.3%. 

The latest decline is the sixth consecutive month of a contraction and is likely due to higher interest rates along with still elevated house prices in the market following the pandemic buying boom. It has become more difficult to buy than just two years ago and an average house price decline was expected.

Unfortunately, for homeowners, especially newer homeowners, there is the need to be alert to the connection between declining house prices and a drop in property values. New homeowners usually have less equity built up in their property and therefore are in danger of falling into negative equity if values fall. 

No matter where a homeowner is in their current mortgage term, experts encourage shopping for a remortgage. It is easy and quick to do online. Visiting the website of a remortgage broker could offer numerous remortgage quotes from a variety of lenders. Brokers could also offer exclusive deals from lenders not offered directly to borrowers. Homeowners could also go from website to website of remortgage lenders to gather quotes to review and compare.

Knowing what remortgage offers are available is helpful for any homeowner looking forward and creating choices for financial security.

A remortgage is going to be a helpful financial tool for thousands of homeowners this year as they come to the end of their fixed two-year deals. The strategy to remortgage sooner rather than later could be a smart choice for those that might fear negative equity and certainly the right choice for saving money by avoiding a SVR.