With the recent decline of lender interest rates and some below the standard base rate of 4.75%, as decided in the November meeting of the Bank of England's Monetary Policy Committee (MPC), UK homeowners may find this an opportune moment to consider remortgaging. Many homeowners might be considering a wait and see attitude since there are whispers of a possible rate cut in early 2025. However, waiting could cost the very savings one is searching for with a new deal. Here's why making the move now could save significant money and what a borrower needs to know before making a decision.

When a homeowner’s current mortgage deal ends, the lender will typically move the homeowner to their standard variable rate (SVR). Unfortunately, a SVR is often significantly higher than the rates offered by remortgage lenders or brokers and could even be double or more. By remortgaging, one can lock in a lower interest rate, reducing monthly payments and overall interest costs. Also, there is no need to worry about rising rates during the mortgage term if one chooses a fixed rate deal.

The MPC’s decision to lower the base rate to 4.75% during their November meeting is a considerable reduction that could benefit homeowners significantly. For context, a reduction in interest rates translates directly into lower mortgage repayments, freeing up more income for other expenses or savings. 

Lenders have been competitive due to the lowering of the base rate, and some have pushed their offerings below the base rate of 4.75%. 

This could offer savings for those with a rate above current remortgage rates. It will certainly be a strong consideration for those that are nearing the end of their mortgage term for skipping a remortgage and allowing the transition to a SVR would have them paying more than necessary. 

Due to the possibility of another base rate cut early next year, homeowners might be tempted to go onto a SVR with the intent to choose a fixed rate remortgage when rates drop further. There are many reasons why this could be a risky choice. At the end of last year there was strong expectation of a rate cut in early 2024, but month after month the wait lengthened. The first rate cut since March 2020 did not occur until August 2024, when the rate was cut by 0.25% to 5.0%.

Homeowners that chose to skip a remortgage and allow a transition of their mortgage debt to a SVR early last year would have paid many months of a higher interest rate. For instance, in the first quarter rates from lenders were near 4.5% with some lower, while SVR rates were near double. 

Rather than accept a SVR and pay more, a remortgage could be the better strategy. For those with strong convictions that waiting for a fixed rate when rates are lower is the right choice, perhaps choosing a tracker rate that will not require a penalty fee for ending the remortgage early when a fixed rate is important. Remortgaging to a tracker rate would still keep the homeowner from a SVR. 

When considering a remortgage, it is also smart to consider new lenders. Loyalty to a current lender might seem like the easy option, but it could cost the homeowner. By exploring deals from new lenders, one may find more competitive rates and terms. Remortgage brokers can help navigate these options, ensuring one finds a deal that best suits their financial situation.

The steps to take for a remortgage is to review the current mortgage deal. Understand the expiration date, and the terms and penalties for early repayment to end the deal before the expiration of the term. Many mortgage terms allow for remortgaging without a penalty fee for six months prior to the end of the current term.

Shop online for remortgage quotes. Remortgage brokers are one stop shopping websites since they work with many lenders. Also, a homeowner might find exclusive deals from lenders not offered directly to borrowers. Homeowners could also go from website to website of lenders to gather quotes. The information from obtained quotes can then be reviewed and compared to discover what deals might be available in which to choose the best remortgage.

Once the choice has been narrowed down to one or even two remortgage choices, ask what necessary documentation is necessary to complete the application process with the chosen lender. This is also the time to ask any questions one might have about the new deal, the process and about other remortgage options one could consider such as an equity cash release remortgage which could provide cash for a homeowner for necessary expenses. 

Finally, once a remortgage deal is chosen, prepare the necessary documentation and complete the remortgage application process with the chosen lender. Once the remortgage deal is approved, the new lender will pay off the existing lender and repayments will begin under the new chosen terms with the new lender.

By considering these points and taking proactive steps, a homeowner could ensure they are making the most financially sound decision for the coming year.