There has been great concern for homeowners as of late. They are facing higher interest rates making borrowing more expensive, which will occur for thousands coming to the end of their fixed mortgage terms this year. Those homeowners that obtained their rate when lenders were offering historically low interest rates will at the end of their term face rates higher than in over a decade.

The relief from paying more than necessary could be found in a remortgage, but that is for those that qualify. It isn’t difficult to qualify for a remortgage, unless you are in negative equity which is when the borrowed debt on the property is higher than the value. Being in negative equity, or underwater in one’s mortgage as it is sometimes called, will require the homeowner to get back into positive equity before being able to remortgage. This would mean paying the lender enough to bring the debt lower than the property value and to a required loan to value (LTV) ratio to obtain a remortgage. 

Those that are unable to remortgage or to escape negative equity status will be a prisoner to their current interest rate. Without a remortgage opportunity, the lender will move the homeowner to their standard variable rate (SVR) which could be double or more the rate that could be found with a remortgage making a SVR more expensive. The SVR will also be subject to more rate hikes should the lender deem them necessary, such as when the Bank of England’s Monetary Policy Committee (MPC) votes for rate increases.

Those that have already remortgaged out of their expiring mortgage term will have benefitted by doing so rather than allow being moved to a SVR. 

Choosing a fixed rate would have saved their budgets from further rate hikes. Experts are forecasting for the peak rate before the MPC halts increases to be 5.5%. The current rate, after twelve consecutive MPC meetings that resulted in rate hikes, is 4.5%. With more rate hikes to possibly come, homeowners protected from increases will have saved money.

Increases in interest rates are not the only worries for homeowners coming to the end of their mortgage term or looking to escape a SVR, lenders are looking to escape the current risks in lending and are becoming less competitive in the market. Many are pulling their mortgage and remortgage deals, especially those with the lowest interest rates. Other lenders are choosing to lower their presence in the lending market and are lowering the number of products available to borrowers. 

Another possible financial hardship homeowners are facing is a decline in property values. This is of course a precursor for many at putting them into negative equity. As house prices decline, so can property values and according to the recent data released from Halifax, the average house price in May marked the first annual decline since December 2012.

The decline of 1% has been blamed on the fall in demand from home buyers due to not only higher interest rates, but the expectation that more are on the way, which is causing a drop in confidence that this is a good time to purchase a home. As borrowing has become more expensive, and demand remained strong in the market in months past, asking house prices continued to grow and for many first-time buyers affordability due to higher rates and higher asking prices blocked their climb to the property ladder.

The current economic environment has first time buyers facing setbacks due to higher interest rates, continued high asking prices, and the difficulty in saving a deposit due to the impact of inflation.

Lenders that have put new products on the market have done so with increase, some at almost an entire percentage point higher. Shopping for the lowest interest rate is now much more of a priority for hopeful home buyers and homeowners ready for a remortgage. 

Homeowners will not only be seeking remortgages, but the opportunity to secure a fixed rate to escape from further rate hikes. 

The MPC has a meeting scheduled for 22 June and another increase to the standard base rate is likely to occur. There will not be a meeting in July, making the next possible rate change in August. While the relief from a possible rate hike in August could be helpful to borrowers, it could result in June seeing a larger rate hike than the 0.25% increases that have happened in the past few meetings. 

A rate hike this month is certainly possible due to the continued high inflation rate. The last report on inflation was 8.7%, which was less than the expected decline from the previous report of 10.1%. The Bank’s target rate is 2.0%, meaning the current inflation level is more than four times target. 

Economic factors are building for homeowners and home buyers to have difficult months ahead, and possibly throughout the rest of the year. Inflation could cause the current base rate to increase from 4.5% to a 5.5% peak level, making borrowing even more expensive than it is currently. Lenders are stepping back from their competitive mode and becoming more reserved and risk aversive resulting in fewer products offered to borrowers. Demand has dropped and could do so even more in the housing market, which could cause property values to decline putting homeowners at risk of entering negative equity.

Homeowners looking for savings and peace of mind from further economic woes are encouraged to shop for a remortgage and to do so soon. Waiting could cause a loss of opportunities for those on a SVR or nearing the end of their term. 

It’s quick and simple to shop for a remortgage online. Remortgage brokers often have exclusive deals and could offer many quotes from a variety of lenders to review and compare to find the best deal. Visiting individual remortgage lenders websites is also a way to gather quotes. 

The lending market has changed in a matter of weeks to be less favorable for borrowers, but there are still attractive deals available. Saving money and shielding from further rate hikes is possible and to do so a homeowner simply must discover the best remortgage offer for their needs and the sooner the better.