In the current economic landscape, homeowners are grappling with a series of challenges that have significantly impacted household budgets. The initial blow came from the pandemic, followed by surging energy costs and an unprecedented 40-year high in inflation. To compound matters, interest rates have soared to levels not witnessed in over a decade. Just two years ago, homeowners reveled in historically low interest rates. However, those affordable rates are now a thing of the past.

Experts are sounding the alarm, urging homeowners to take proactive steps to safeguard their financial well-being. Foremost among the recommendations is exploring the option of a remortgage, even if it means setting aside any loyalty to current lenders in pursuit of the best deal.

Of particular concern are homeowners approaching the conclusion of their existing mortgage deals. Many secured their mortgages during a period when the Bank of England's Monetary Policy Committee (MPC) kept the standard base interest rate near zero at 0.1%. In December 2021, the MPC undertook a series of consecutive rate hikes that resulted in fourteen consecutive meetings with the majority vote to increase the base rate. In September 2023, the MPC voted to keep the rate at 5.25% and repeated the decision during the November meeting.  

Inflation remains over three times the target rate of 2.0% set by the Bank, which means that there is not full certainty in the rate staying at 5.25%. It is hoped it is the peak rate, but the MPC has warned that if needed they will indeed continue to fight inflation with base rate increases. 

The 5.25% base rate set by the Bank serves as a benchmark, but lenders typically offer higher rates to cover the administrative costs and risks associated with loans. Before the MPC's initial rate increase in December 2021, average rates hovered around 2%, but recent weeks have seen interest rates on remortgages fluctuate around 6.0% or more. There have been reports of lower rates, but those are reserved for loan-to-value (LTV) ratio levels of 75%. Newer homeowners are not likely to have built up 25% in equity and they are the most vulnerable to the higher rates.

Homeowners are reminded of the critical factors influencing a lender's decision on available deals, with a key consideration being avoiding negative equity or being underwater with a mortgage. This situation arises when the property value falls below the property debt, a genuine concern given the potential for declining property values.

The LTV is a pivotal factor in determining available deals, with higher property values relative to the loan amount providing access to more favorable rates. For instance, a recent average interest rate for a 2-year fixed rate remortgage with a 75% LTV was 5.60%, considerably lower than the average standard variable rate (SVR) of 8.18%.

The potential to save money by avoiding a SVR is why experts are encouraging homeowners to shop for a remortgage.

As homeowners near the end of their mortgage terms, the decision to remortgage or transition to the lender's SVR becomes crucial. As discussed earlier, SVRs are typically higher than rates available through remortgages, and are subject to further rate hikes. Opting for a fixed-rate remortgage not only secures a lower interest rate, but also shields homeowners from potential future rate increases.

Experts advocate for homeowners to reacquaint themselves with their current mortgages, understanding the type of loan, term end date, and current interest rate. This knowledge serves as a foundation for embarking on the journey of shopping for a remortgage. The online landscape makes this process seamless, with remortgage brokers and lenders providing quick quotes which facilitates comparisons. A broker could offer many quotes from a variety of lenders in a matter of minutes, but the homeowner also has the choice to go from website to website of lenders to gather quotes.

While acknowledging that remortgaging early involves fees, homeowners are advised to weigh additional costs against potential savings, considering factors such as the length of the term, loan type, and possible incentives. The myriad benefits and unique deals offered cater to the diverse needs of homeowners and could encourage a homeowner to remortgage early. 

In the pursuit of the best deal, homeowners are encouraged to start their remortgage shopping online. However, it is emphasized that before making a decision, careful consideration of costs and benefits is essential. Seeking advice from a financial advisor or remortgage broker adds an extra layer of guidance to determine whether remortgaging aligns with current and future financial goals.