In February 2022, the Bank of England’s Monetary Policy Committee (MPC) in their first meeting of the year, increased the standard base interest rate to 0.50%. It was the second increase in what would end up being fourteen consecutive MPC meetings that resulted in a rate hike. Throughout 2021, until the December MPC meeting of that year, the rate had been at an historic all-time low due to the pandemic before it increased from almost zero at 0.1% to 0.25%. Despite the increases that had come, borrowing was still cheap and with the warning of more rate hikes on the way, there was strong motivation for hopeful home buyers to purchase and obtain a low mortgage rate before they would likely be higher.

The rate certainly did climb, as mentioned, throughout fourteen consecutive MPC meetings until in 2023 it had reached a fifteen year high at 5.25%. There it has rested for the last four MPC meetings as the peak rate may have been reached to bring inflation under control.

The result is that there are many homeowners facing difficult financial situations.

Taking advantage of the cheap interest rates available, many home buyers secured a fixed rate mortgage in the face of rising rates. They were able to lock in their chosen deal and pay their mortgage at a low interest rate until their two-year term ended. February 2022 and February 2024 are very different for those facing changing interest rates on a large debt as would be the case with a property purchase. Unfortunately, there are homeowners unaware of the change on the way with the expiration of their term, while others aware will have found it difficult to save for the upcoming change due to inflation.

The two-year mortgage terms ending this year will offer homeowners the option at their expiration of remortgaging or allowing their lender to move them to their standard variable rate (SVR). Avoiding a SVR and choosing a remortgage is the suggested option for saving money. The most favorable rates will be found with a remortgage as well as the ability to secure a fixed rate deal. Choosing a higher rate SVR that could increase, even without the MPC voting to raise the base rate, is a risk few would want to take.

While a remortgage is the best strategy according to experts, it is not always a choice available to all. Some homeowners have fallen into or will fall into negative equity. This occurs when property values decline below the amount of debt. Without built up positive equity in the property, the homeowner will be out of reach of a remortgage and will be moved to the lender’s SVR. There they will remain as a prisoner to the higher cost mortgage until they can escape to a remortgage choice or rates decline drastically, which is not expected.

Some will pay into their mortgage to escape the negative equity, some will be taken out of it when house prices rise and property values with them. Until then, a SVR could make it difficult for homeowners to afford their repayments. 

Even those with a new remortgage could find higher interest rates difficult and decline quickly into arrears.

In a recent survey of 2073 homeowners, approximately 4.0% expect to miss a repayment. Factoring the 4.0% across the population of homeowners, the result could forecast almost half a million missing a payment this year. The latest data from UK Finance reported a bit over 1.0% of mortgages are currently in arrears. This is a 25% increase in a year-on-year comparison.

According to almost half of mortgage holders, along with continued strains of inflation, and higher energy prices, their mortgage repayments are a cause of financial related stress.

This is why experts encourage shopping for a remortgage. It is simple and fast to do online. In a matter of minutes, remortgage quotes could be in hand to review and compare. Remortgage broker sites could offer numerous quotes from a variety of lenders. They could also offer exclusive deals from lenders not offered directly to borrowers. Homeowners could also go from one lender site to another to obtain quotes to review.

Comparing remortgage quotes allows a homeowner to discover what options are available to them. In the case that a remortgage is out of question due to negative equity or other situation, it is suggested homeowners speak directly to their lender for assistance for there may be options to help keep them out of arrears.

Meanwhile, shopping for a remortgage is encouraged for all homeowners no matter where they are in their current term, whether it has already ended or will end this year or even next. The information could be valuable in creating a strategy to save money, prevent missed payments, and even offer peace of mind.