There is always the question of whether a homeowner should remortgage now or wait. The answer is a unique one that cannot be answered easily. The decision depends on what the current financial needs of the homeowner are as well as the current economic situation. Of course, economic forecasts for the near future have an influence on the choice. Unfortunately for some homeowners, what is so obvious now as to whether to get a new deal or wait, was less obvious a month ago and the outcome could have been costly.

Last month, the inflation rate for September revealed a steeper than expected decline. It dropped below the target rate of 2.0% set by the Bank of England to 1.7%. This lower than expected inflation rate triggered the Bank of England’s Monetary Policy Committee (MPC) to lower the standard base interest rate from the then current 5.0% by 0.25% to 4.75% during their November meeting. 

This marked the second time in the year the MPC voted for a rate reduction and only the second reduction to the base rate since March 2020. Due to inflation dropping below target, which had been expected to occur in the first half of next year, the odds of another rate cut before year end grew.

The last meeting of 2024 for the MPC is next month. The following scheduled meeting will be held in February 2025. That means the next rate decision by the MPC will remain steady until the second month of next year.

For homeowners that were on the expiration of their current mortgage term and trying to decide whether to remortgage within the last three months, there were good reasons to do so. For with the expectation of a total of three rate cuts in 2024, with the second and third in November and December, the better lender rates were possibly yet to come.

In summer, as the August MPC meeting grew nearer, confident lenders dropped their rates and did so competitively. Others followed with rates to match or to outdo those that had already revealed their top deals to gain the attention of borrowers. Even before the MPC voted for a reduction to the base rate, lenders had lowered mortgage deals to below 5.0%. Remortgages were not as low as mortgage rates, but they were also near or below 5.0% and yet the base rate remained at 5.25% until the MPC voted for the first cut of the year to 5.0%.

Confidence and competition remained in the lending market. Another rate cut was hoped for, but some lenders began to be weary as the budget announcement neared. The lowest rates were pulled by some lenders and replaced with slightly higher rates, while others pulled deals and did not replace them.

Homeowners had been given a glimpse of how much money there was to save when only a slight reduction was offered by the MPC because lenders were optimistic and revealed it in their offers. Then in a matter of weeks without any reasons that would be obvious to borrowers, deals began to disappear. 

Some chose to remortgage at the already unexpectedly low offers that mirrored a second MPC rate cut that had yet to happen, while others hoped for not one but two rate cuts by year end.

To wait or not was the choice, but that choice could be costly and not just because perhaps the best rates were already on the market. When a homeowner comes to the end of their mortgage term and passes on the opportunity to remortgage, their lender will transition their debt to their standard variable rate or SVR. It is risky due to being a variable rate that is already much higher than could be found with a remortgage. In fact, it is not unheard of for a SVR to be double or more the offerings with a remortgage. 

Choosing to wait for lower lender offers rather than remortgage would have the homeowner moved to a SVR and they would be paying more than necessary.

If the rate is reduced again by the MPC, it is no guarantee that the current rates will drop dramatically as they have already. It is also not a guarantee that lenders would choose to keep their current rates. Swap rates, the interest rates charged when lenders borrow from one another, could rise due to global influences and cause lenders to pass along the cost to borrowers with higher rates. 

Of course, there is also the possibility that the forecasted future rate cut will take longer than expected. It was this time last year that the forecast was for the first rate cut since early 2020 to happen in the first quarter of 2024. Lenders dropped rates in anticipation of the rate cut and borrowers that took action to secure a deal were rewarded. 

However, expectations were fleeting as inflation not only remained stubborn but grew. Lenders quickly pulled their best deals, and the wait continued past spring and finally into late summer as the first reduction was voted for in August. Remortgaging when lenders were optimistically lower rates would have offered savings, while waiting for lower rates on a SVR had homeowners paying more and waiting much longer than anticipated for lender rates to be attractive but still higher than they were earlier in the year.

Forecasts are just a small glimpse into the future of what could occur, but it is never a guarantee.

Homeowners hoping for a third cut to bring current rates lower, are not likely to see that happen. Inflation grew above target in October and was reported this month at 2.3%. 

The good news is that the MPC is not expected at all to raise the base rate to tame the growing inflation rate. Instead, they will likely allow it to rest and remain at work against rising prices. This means the current base rate of 4.75% voted for this month will likely be voted to remain steady in December and will continue until January until the next scheduled meeting in February. 

Again, the question for homeowners that allowed their loan to be moved to a SVR, those nearing the end of their current mortgage term, and even those expected to see their term expire in the next six months is whether to remortgage now or wait. Experts encourage shopping for a remortgage as it will offer quotes to review and compare.

Shopping online for remortgage quotes will offer quick access to information important to a homeowner trying to decide to remortgage now or later. Experts often encourage quick access to quotes by shopping with a remortgage broker, and homeowners might also discover exclusive deals.

For now, anticipation and attention are centered on the next report of inflation which will be released on 18 December, one day before the scheduled MPC meeting on 19 December.