The current rate of the Bank of England is 5.25%. It is the highest rate in fifteen years, and for those borrowing a large amount, the interest rate matters to the point of pushing something beyond affordability such as in buying a home. Homeowners remortgaging at the end of their mortgage term could face sliding into arrears due to higher interest rates. This is why when lenders begin to lower their offerings below the Bank’s rate borrowers should take notice.

The average two-year mortgage in the UK according to Moneyfacts has fallen to 5.92%. This would be considered an attractive rate in most cases as it is only slightly higher than the standard base interest rate of 5.25% set by the Monetary Policy Committee (MPC). Yet, this week HSBC offered a two-year fixed rate remortgage at 4.49% and a five-year at 3.94%.

HSBC follows the lead of both Halifax and Leeds Building Society, which cut their lending rates below the Bank’s rate this week as well.

This could be a sign that lenders believe the MPC is likely to cut their base rate and they are getting a jump on the competition by offering lower rates before they will be common in the weeks ahead. It would be a competitive move that would be a good strategy to gain the attention of borrowers now when fewer lenders have the same low rate offers.

Much of the optimism from lenders is attached to the optimistic reports on inflation that have been offered lately. Lower inflation will mean more stability in households and the risk of lending is then lowered. However, there is always the possibility that inflation could stall or if it is, as some believe, more a reflection on the cap of energy costs that has pushed inflation downward, it could actually require another rate hike in the near future. The current inflation rate is 3.92, which is slightly under double the target rate set by the Bank at 2.0%.

Lenders cutting their product rates to such lows should be considered as a temporary offer by borrowers. If the new rates are indeed as attractive to a borrower as intended, then homeowners should not hesitate to shop for a new deal. They could disappear quickly at the whim of the lender.

In some cases, it might mean pushing loyalty aside to shop for a deal with a new lender. It is as easy to develop loyalty to a new lender when they are saving you money at a time when any savings would be helpful, so experts encourage homeowners to shop away.

It is easy to shop for a remortgage online. A few minutes online with a remortgage broker could put numerous quotes from a variety of lenders in hand for the homeowner to review and compare to discover the best deal. Brokers also often have exclusive deals from lenders not offered directly from lender to borrower, so shopping with a remortgage broker could turn up an unexpected offer. Homeowners could also go from site to site of lenders to gather quotes.

Those shopping for a remortgage should not be put off should they not encounter the best rates mentioned lately in the news for the lower than base rate deals. The best offers are often reserved for homeowners with low ratio loan to values or LTVs. For instance, the HSBC 3.94% remortgage five-year deal is for a 60% LTV, and it comes with a fee of £999.

Many times, the lowest interest rate deal is out of the reach of a borrower that has not built-up equity to have a low LTV, which would be the case of most fairly new homeowners. Also, the lowest interest rate often comes with the highest fee. 

Borrowers should not be discouraged should this offer not be a possibility. For in taking into consideration the entire remortgage, the rate along with any fees and possible incentives, the homeowner will discover the true cost or savings of a remortgage deal. One offer may not have the same savings as another with a slightly higher rate and lower fees. This is why shopping for quotes to compare is a smart strategy.

For some homeowners, the remortgage will be not only a new deal but one to bring about peace of mind. Remortgaging at the current rates could be an advantage over rates offered later on should inflation stall and require another rate hike. A fixed rate deal will lock in the rate to shield from any rate hikes. Also, choosing a remortgage at the end of a mortgage term would likely offer a substantial savings over allowing the lender to transition the mortgage to their standard variable rate (SVR), which could be double or more the rate offering of a remortgage.

Certainly, the possibility of discovering a rate under 4% when the base rate is 5.25% is exciting, but it might not be an offering that every homeowner will qualify for, but that should not deter a homeowner from shopping online to discover their own personal quote for a unique remortgage offer for their needs. It more than likely is the better choice than taking on a SVR.