Many homeowners are coming to the end of their mortgage term this year, or they already have done so. Those that secured a two-year fixed deal in 2022 are likely to experience financial pain at the difference in the cost of borrowing then and now. For at the expiration of their mortgage term their current interest rate will end, and they will either remortgage or their lender will move them to their standard variable rate (SVR). Avoiding a SVR is encouraged by experts because the interest rate will likely be much higher, and more expensive with an SVR than with a remortgage.

The lender rates available in 2022 are not going to be found in 2024. It’s almost June, and in June 2022 the standard base rate of the Bank of England was increased to 1.25%. In contrast, the standard base interest rate is now 5.25%.

According to the latest information released by LMS, almost 71% of homeowners remortgaging in April now have higher repayments. There were 22% with monthly payments that declined. Of the monthly repayments that increased, the average monthly amount of increase was £355.

Despite the higher interest rates of 2024, homeowners have made the five-year fixed rate deals the most popular. The next most popular are two-year fixed rate remortgages. The popular five year choice could mean homeowners are seeking security in a long-term deal due to the current economic instability.

In the first part of the year, there was growing optimism for the Bank of England’s Monetary Policy Committee (MPC) to cut the base rate. Inflation was stubborn and did not decline as hoped, and the forecast for a rate reduction was moved to summer. Last week, the inflation report disappointed again despite falling from 3.2% to 2.3% and the hope for a sooner rather than later rate cut was dashed.

Before there were forecasts for two or possibly three rate cuts in 2024, but now it might be only one. The skeptical expectations for rate declines could be pushing homeowners toward the security of a longer-term remortgage instead of a shorter term while hoping for lower rates in the years to come, and accepting rates will not decline to the levels of early 2022.

Nick Chadbourne, chief executive of LMS, remarked, “The key mortgage figures from UK Finance in 2023 showed an increase in product transfers of 17.1% compared to those in 2022 – it is clear that the PT trend has continued into 2024.

“While not as significant as April, we are heading towards another spike at the end of July.

“Typically, this would mean an increase in remortgage instructions a few months prior; however, as is shown, we have experienced an atypical decrease in remortgage instructions month on month.

“In other news, for the first time since November 2023, five-year fixed product has become the most popular choice amongst customers.

“Our data also shows that 73% of customers’ product choices are motivated by security and wanting to know how much to pay per month.

“Both metrics indicate that a critical driver for borrowers is wanting certainty of mortgage payments over the longer term; although the Bank of England suggests rates will reduce, borrowers are opting for potentially higher payments over a longer term to ensure they have that certainty.”

For those looking for some spark of hope for lower rates to come sooner, there will be two inflation reports before the next MPC meeting. One was last week, which as mentioned was not as low as hoped, but it is closer to the target rate set by the Bank of 2.0%. The next inflation report will be on the 19 June, and the following day will be the scheduled MPC meeting. If the standard base rate is below target, then perhaps the MPC will feel confident that inflation will remain controlled and offer a small cut of 0.25%. 

For homeowners ready to secure a fixed rate remortgage now, especially since some lenders have been cutting their rates in expectation of lower demand in borrowing, shopping online for a new deal is simple and quick. Visiting the site of a remortgage broker could put numerous quotes from a variety of lenders in front of the homeowner to review and compare in only minutes. Brokers also could offer an exclusive deal from lenders not offered directly to borrowers. Homeowners could also go from website to website of lenders to gather quotes.

Peace of mind with a set repayment is likely to always to be a popular choice for homeowners, especially over a SVR which is risky, variable, and normally more expensive with a higher rate. However, now homeowners are seeking longer commitments with a repeating and known repayment, and that peace of mind may be worth having now rather than waiting for lower rates ahead that could be soon or perhaps much later than expected.