There is no doubt that a remortgage could be quite helpful to a homeowner in the current economic environment. This is especially so for those homeowners coming to the end of their mortgage term. Without a remortgage, they will be moved to their lender’s standard variable rate (SVR) and that interest rate could be double or more the level offered with a remortgage. Also, a SVR would put the homeowner at risk of rising rates while a fixed rate remortgage could shield the homeowner from any further rate hikes, and there are certainly more rate hikes expected in the months ahead.

The Bank of England’s Monetary Policy Committee (MPC) has increased the standard base interest rate during each of the last thirteen consecutive meetings. At the last meeting, the MPC doubled the increase from previous meetings and pushed the base rate up by 0.50% to 5.0%. Due to stubborn inflation, the MPC is expected to increase the base rate to at least 5.75% before inflation nears the Bank’s target rate of 2.0%.

Homeowners are facing more expensive borrowing due to the increase in the base rate. A little over a year ago, the base rate was at an all-time historic low of almost zero at 0.1%. Now it sits at a rate higher than seen in over a decade. 

The impact of higher rates is expected to slow spending and therefore bring demand down for a wide range of consumer products and services and dilute inflation’s hold on the economy. 

The higher rates have a greater impact on those borrowing and those on variable rates. Homeowners are one of the major concerns as they borrow large amounts of debt and even if they choose a fixed rate deal, their term will end at some point and many of them during the historic low interest rate offers chose a two-year fixed rate deal. 

The two-year mark has either come and gone or will soon for thousands of homeowners. Their historic low fixed rate will have shielded them from the rising base rate, but at the end of their term they will no longer be shielded from higher rates and will no longer pay their debt at their very low and affordable rate. 

Unfortunately, had the rates been lower, there are some that would simply remortgage and continue on, but affordability has become an issue for many and so much so that some have had to turn to selling their home because they can no longer afford it at the current interest rates.

Now, there is another warning for homeowners besides preparing for higher interest rates and that is house prices could fall in the coming months. 

Declining house prices would be considered to be a bad omen for only those selling properties. However, homeowners could feel the pain as well. With declining house prices can come declining property values.

Should the property value of a home fall below the debt of the property, the homeowner will be considered in negative equity. Being in positive equity, or having more value than debt in a property, is required for a remortgage. To escape a SVR, and to have the opportunity to lock in a rate with a fixed rate deal to avoid further rate hikes, a remortgage is needed. Without the ability to remortgage, homeowners could become a prisoner to their mortgage and its higher SVR which will reflect further rate hikes as they occur, and more are expected in the near future. It amounts to paying more than necessary had a remortgage been available to them.

Homeowners are being warned now to not only prepare for paying higher interest rates at the end of their current term, but to perhaps consider remortgaging early to escape falling into negative equity and being unable to remortgage later should property values decline.

The housing market has certainly slowed and with the latest base rate increase and lenders responding with more expensive mortgage offers, many hopeful home buyers are expected to lose confidence in the market and step back from the property ladder dream.

For those homeowners close to having their mortgage term end, they could consider remortgaging sooner rather than later and choose from current rates. The next MPC meeting is in August and another rate hike could happen in that meeting depending on the next inflation report.

Some homeowners could remortgage six months out from the date of their mortgage term ending without a penalty fee. Others might consider a penalty fee worth the opportunity to avoid higher rates later. It could also bring peace of mind by shielding the homeowner from the economic shifts expected throughout the rest of the year.

It’s easy to shop online for a remortgage. Visiting a remortgage broker website could put numerous quotes from a variety of lenders in hand to review and compare in a matter of minutes. Brokers often have exclusive deals not offered directly from lenders to borrowers, so there is definitely motivation to shop with them just in case. Of course, a homeowner could go from site to site of the remortgage lenders they wish to gather quotes from to review as well.

Once quotes are in hand, it is quite easy to discover what benefits and opportunities are available for a homeowner. Preparing now for the end of one’s mortgage term or to escape a current SVR, and preparing for higher interest rates in the future and a possible decline in property values is important according to experts. It’s a lot to consider but doing so could make all the difference.