The current economy is unfriendly to many, but homeowners might be the most pressured. They have struggled to survive the gloom and doom of Brexit only to enter a global pandemic followed by double digit inflation. The household budget has been under attack from unusual sources. No one could confidently predict what would occur during Brexit, or the pandemic, or the recovery high inflation economy to follow. Homeowners could be teetering on the edge of affordability or sitting along the sidelines hoping for the best and a break in their difficulties and worries.

So where does the state of peace of mind exist? 

The pandemic brought hardship, but it brought financial gain to most homeowners. They could shop for a remortgage and lower their interest rate and therefore the cost of borrowing. For those that obtained a remortgage during the period when the standard base interest rate was at a historical low of 0.1%, their new rate likely saved them thousands of pounds. Of course, they could have been first time home buyers or home movers during the low rate offers and found a mortgage that was unbelievably cheap in its affordability due to historically low rate offers from lenders.

Meanwhile, the strong demand for property during the pandemic drove house prices to new records, and the result was a large gain in equity for homeowners that stayed put or newly bought. Some cashed out their equity in equity cash release remortgages and used the cash to make upgrades and improvements to their property which in turn increased their value and equity in the home.

However, the economic gains were not to stay around for long. Inflation pushed the Bank of England’s Monetary Policy Committee (MPC) to increase the base rate out of its historic low. The rate was first increased in December 2021, and in a staggering consecutive fourteen MPC meetings the base rate was hiked. It has grown in less than a year from almost zero at 0.1% to 5.25%, which is the highest in over a decade.

Homeowners, as well as new home buyers, that took advantage of the most popular lending products at the time benefitted by being shielded from the rising interest rates with a fixed rate deal. Many took out two-year remortgages and mortgages, and for those that did so in 2021 before the rate was increased, they have been paying on their low interest rate. The end of their term has either come or will soon and with it their historically low fixed rate offered by their lender will end as well. 

In the present day, the rate change in what is offered and what they are paying could mean three times or more the cost in borrowing. Repayments will be higher or will be extended out for longer which in turn still costs more. There is no escaping the higher costs of borrowing, the lending market has changed as the economy has struggled with inflation.

The next MPC meeting is Thursday, 21 September. Hours away and still there are some experts debating what is ahead. Most economists and other experts believe a rate hike is necessary and will occur. The expectation is for an increase of 0.25%. What happens next is not so clear, and little can be found for homeowners seeking an insight to make the most of their strategy to save money.

What do homeowners have in the way of strong information in which to make a decision? 

For one, the rate is not going to plummet to the historic levels seen during the pandemic. Perhaps it was the first time a home buyer paid attention to interest rates and was unaware of the fact that it was unusual, historic actually, in the low level of interest rates and cheap borrowing. It was, in other words, not normal. Rates will not return to the level seen during the pandemic when there were lockdowns and leading up to the first of fourteen consecutive rate hikes in December 2021.

There will not be deep cuts to the current 5.25% base rate, or the expected 5.50% base rate result expected on Thursday. Inflation is the reason for the increases, and inflation was last reported at 6.8%, three times higher than the target rate as mentioned earlier. If indeed the September MPC rate increase results in a steady rate and seen as the peak rate, it will be some time before inflation reaches target and then it might be allowed to dip below target to make sure it is under control. 

Lenders are currently competitive, and they dropped their rate offerings in the last few weeks, but that could change as demand grows either from home buyers or due to homeowners seeking remortgages. It could also change if lenders see the risk in lending is higher, such as would be the case if inflation fails to decline as expected, or if the MPC raises the rate higher than the forecasted 0.25%. Lenders could also on their own choose to react to the economy and raise their offerings making the current rates of today no longer available.

Homeowners should consider the forecasts of experts, but they should also consider their own personal situation. Hoping for an opportunity at much lower rates to bring their repayments down to a level of better affordability is a wish at best. Certainly, it is not worth risking one’s financial future when there are alternative actions to take.

Shopping for a remortgage online is fast and easy. Visiting the website of a remortgage broker could put many remortgage quotes in hand from a variety of lenders in only minutes. The quotes can be reviewed and compared to discover what benefits and opportunities are available. Sometimes brokers have exclusive deals available from lenders that the lenders are not offering directly to borrowers. Homeowners could also go website to website of remortgage lenders to gather quotes to compare.

Avoiding a standard variable rate (SVR) of a lender at the end of one’s mortgage term could save money. Choosing a remortgage, which is normally of a lower interest rate than a SVR, could save a substantial amount of money and so could a fixed rate to avoid further rate hikes.

Also, if a homeowner is facing affordability issues, waiting until the last minute to find a solution due to the stress of it all is unfortunately only going to make things worse. Contacting your lender for help and assistance is suggested. While perhaps the quickest and easiest and less stressful action to begin things is simply to shop online for a remortgage. It could motivate at a time when confusion and stress could otherwise take over.

The economy is on the way to a better position, but there are still days to endure inflation, perhaps higher energy costs in the winter, and higher interest rates than existed less than two years ago, but there are solutions and peace of mind to be found. One only has to gather information, get acquainted with one’s current mortgage situation as to what type of loan, the interest rate, the time left in one’s term or if they have been already moved to a SVR and then get online to remortgage shop and in a matter of minutes perhaps the strategy to saving money will present itself.