The housing market might be in a transitional state according to a recent report. After seven consecutive months of declines in the average house price, April data revealed a slight increase of 0.5%. The data from Nationwide contrasted with the prediction of experts of continued decreases due to higher interest rates as well as remaining high asking prices in the market. The buying boost could be attributed to the rise in demand for flats from first-time buyers or due to the normal increase in buying that occurs in the spring season.

Lenders could have contributed to the attention from buyers for despite the latest increase in the standard base interest rate by the Bank of England’s Monetary Policy Committee (MPC), fixed rate mortgages remained below the expected offers. Lenders offered rates very competitive and attractive as they sought borrowers in a market forecasted to lack consumers.

The increase in the housing market is not being seen with an overly optimistic lens. Experts, as well as Nationwide, are not expecting house prices to be on a sure and steady rise. There is still economic stress, higher interest rates of which there could be more to follow, and household budgets weakened for over a year by inflation.

Inflation in fact is the reason that more interest rate hikes are expected. As of the last report, inflation was at 10.1%, which is more than five times the Bank’s target rate of 2.0%. The MPC has taken an aggressive stance to push the rate downward and during their next meeting this month the Bank’s rate could be increased by another 0.25%.

If the base rate is increased during the May meeting, it will be the twelfth consecutive meeting in which the base rate has been hiked. The first of the twelve meetings occurred in December 2021 when the historically low rate of 0.1% was increased to 0.25%. In March, the last meeting held, the rate was hiked to 4.25%. 

The difference in the rate levels in just over a year has caused concern for borrowers. It is thought there are many first-time buyers that have had to step back from the market due to the inability to afford a purchase. For homeowners, the concern is whether they will be able to afford their repayments.

There are thousands of homeowners that will be coming to the end of their fixed rate mortgage terms this year. Those that secured two-year fixed rates will have chosen from rates that could have been historic low offerings from their lender and so far, would have been shielded from rate hikes. However, that cheap fixed rate will disappear at the end of their term. This is why experts are concerned about not only the homeowners, but also how the housing market could impact their opportunities to save money.

Homeowners coming to the end of their terms have the choice to either remortgage or allow their lender to move them to their standard variable rate (SVR). When rates are rising, a SVR is considered risky as it is normally higher than the rates offered with remortgages. It is also subject to further rate hikes. Instead of allowing the lender to move their loan to a SVR, a remortgage could help the homeowner save money.

Saving money is possible by finding a lower interest rate than what a SVR would allow and further savings by choosing a fixed rate which would protect the homeowner’s repayments from further rate hikes.

Because the rates to choose from now are very different to those offered two years ago, it is important to shop for the best remortgage. This is where the current housing market comes into play for the homeowner. Property values are impacted by the health of the housing market. Declining house prices could impact property values and increasing house prices could increase property values. Property value is important for a lender in determining lending for both mortgages and remortgages. It is when the lender compares the property’s value to the amount of the loan request that helps determine approval as well as the interest rate offered.

A higher property value to the amount of the loan offers better interest rates than if the loan amount is closer to the amount of the property value. The lender seeks to lessen the risk in lending by the loan being less than the property’s value. The comparison is the loan to value or LTV. 

To qualify for a loan and for better rate offerings, a home buyer seeks to make the lender’s risk lower in lending, which is why deposits are offered during purchases. 

When the housing market is unstable or losing demand in buying and property values decline, a home in which the owner has had little time to pay down debt could dip into negative equity. This is when the value is below the debt on the property. A remortgage is out of reach for a homeowner in negative equity when a mortgage term ends, and the homeowner is said to be a prisoner of their mortgage. They must endure whatever rate is offered by the lender in a SVR and with no opportunity to shop for a better rate they will be paying more than necessary.

There are two factors that have come together to make the outlook for remortgaging good for homeowners despite the historic rates from two years ago being absent. One, lenders are competitive and are offering attractive fixed rate deals that have had little impact by the last base rate increase by the MPC. Two, the housing market has shown resilience and the gloom and doom forecasts of steep declines and property value losses have not happened. 

The opportunity to remortgage is still available to many homeowners which is important in creating a healthy financial budget despite inflation and other economic strains. The ability to remortgage and secure a lower interest rate than what would be forced on a homeowner with a SVR could save a substantial amount of money. Securing a fixed rate takes away the stress of having to endure further rate hikes.

It is easy to shop for a remortgage online. By visiting a remortgage broker, a homeowner could have numerous quotes in hand from a variety of remortgage lenders. Brokers could also offer exclusive deals lenders do not offer directly to borrowers. Homeowners could also go from a remortgage lender website to another to gather quotes.

Once quotes are in hand, a homeowner could review and compare offers and determine which provides the best benefits for their needs. The next meeting of the MPC is days away, and the housing market could unexpectedly move in the direction of expert forecasts and see decline. 

There is no time like the present to shop for a remortgage for homeowners seeking a smart strategy to save money, especially if they are already on a SVR as their term has expired or for those homeowners nearing the end of their mortgage term this year.