In an effort to help homeowners during the pandemic lockdown, the government helped bring about the possibility for a mortgage payment holiday. It was intended to help those that were cash strapped and finding it difficult to make ends meet financially. However, it is estimated that 70% of those that took a payment holiday did not do so because they had a financial difficulty according to banking trade organization UK Finance. No matter the reason, that skip in payments could have caused the homeowner to experience difficulty in remortgaging over the next twelve months.

Without a remortgage possibility, the homeowner’s current mortgage deal, once it ends, will convert to the lender’s standard variable rate (SVR). The SVR could offer a low interest rate currently, but should rates begin to rise so will that rate. SVRs are considered risky for those that would do best with a set monthly repayment amount that will not fluctuate and would not increase with little notice. 

Being stuck on a SVR means the homeowner will miss out on the opportunity to shop for a fixed rate remortgage while rates are so low. The homeowner could gain peace of mind that they are safe from fluctuating repayments and possible rising rates for months or years to come.

The government had insisted that the homeowner’s credit history would not be impacted by taking a payment holiday. Close to 2 million homeowners took advantage of the offered payment holiday deal. The impact on the credit file might prove true, but lenders often consider much more that the credit information when approving a remortgage.

Those that took the holiday might not be looked at favorably by a lender. Any increase risk that the borrower might not be steady in making payments in the future could hamper their efforts to remortgage. In addition, with the deeper impact of the pandemic on the economy, lending is expected to tighten in the coming weeks and months. How long that will last is unknown.

Experts encourage homeowners to consider carefully the consequences of taking a repayment holiday. If the repayment relief was taken and a remortgage is desired, it would likely prove helpful to push aside loyalty to the current lender. Shop remortgages from the current lender as well as those offered by others to seek the best deal. Also, don’t overlook remortgage brokers as they will have direct knowledge as to which lenders would be willing to work with a homeowner with a complicated remortgage and those that took advantage of the offered repayment holiday.

There are certainly great remortgage deals to be found. Being persistent and dedicated to shopping for a deal should be the strategy to achieve a remortgage opportunity. Despite the negativity one lender may feel for the repayment holiday, the next on one’s shopping list could be more favorable. It certainly could be well worth the effort as the savings obtained could be substantial.