The need for a remortgage has been repeated by experts for over a year now. Those that waited out the warning are paying more money than if they had listened to the advice earlier. The reason is that borrowing is much more expensive than it was only a little over a year ago. Those with debt subject to rising interest rates are having difficulty adjusting their household budgets and while there are those hoping for the rates to bottom out again to make affordable rates more accessible, it is not likely to happen. If anything, the current rates will be disappearing soon, and higher ones are in our near future.

There are two distinct reasons for the lows and highs recently experienced in borrowing. The Bank of England’s Monetary Policy Committee (MPC) lowered the standard base rate to almost zero at 0.1% during the pandemic. It was necessary to keep the economy healthy and to help households with so many difficulties including the lack of work and lack of spending during lockdowns. Then inflation took hold and rates began to rise to counter the impact of inflation and to bring it back toward the Bank’s target of 2.0%. It had been at 10.1% during the previous report, but now is at almost 9%, but still higher than the target rate.

In December 2021, the MPC began the first of twelve consecutive rate hikes. The 0.1% base rate was increased to 0.25%, and now the rate is at 4.5%. From almost zero to 4.5% is a grand leap in terms of how much borrowing costs.

One group feeling the financial strain is homeowners. Many secured their home mortgage or even a remortgage during the historic low base rate. Lenders offered their own historic lows with some borrowers securing loans near 2%. The most popular loan was that of a fixed rate which locked in their low interest rate for the duration of their loan term.

Now, the two-year mark has come for many that bought their homes during a buying boost in the housing market, and thousands are coming to the end of their term and their fixed rate deal will expire. No longer will they be paying at the rate they were used to but will paying their property debt attached to a higher interest rate. 

Affordability will be an issue for many according to experts. It is highly suggested that if a homeowner is having affordability issues that they contact their lender as soon as possible. Waiting until the issue is a major problem and there are few if any options available to help the homeowner is not an ideal strategy.

Remortgaging is the solution many homeowners are seeking to help them with affordability and to save money. While the historically low rates are gone, there are savings to be had. One is to avoid being moved to the lender’s standard variable rate (SVR) which could be double or more the rate offered with a remortgage.

When the homeowner’s term expires, they have the choice to remortgage or to allow the lender to move them to their lender’s SVR, which is considered risky and more so when rates are rising. The term variable is the issue as it means the rate could rise when the lender determines it necessary. It could be when the MPC decides to increase the base rate or for other reasons the lender determines are necessary for an increase.

One example is the recent increases in rate offerings by lenders. After the MPC increased the base rate to 4.5% this month, many lenders held back increasing their SVR or even with some of their offerings to remain competitive in the lending market. However, the recent report on inflation which remained stubbornly high despite the continuous Bank hikes moved many lenders to increase their rates last week. Many of the lowest interest rate offers for mortgages and remortgages disappeared overnight. 

While the lenders holding back with rate hikes was a nice relief for borrowers, it wasn’t expected to last, and it didn’t. Now there are expectations of the peak for rates this year to be higher than previously expected. Only last month the peak was expected to be 5.0%, while months earlier it was 4.8%. Now, inflation resistance has led to the forecast for this year to see the base rate rise to 5.5%.

If the MPC continues their increases of 0.25% as has been the case for a few of the last meetings, there are a minimum of 4 more rate hikes to come. 

Rather than face rising rates and a rate higher than necessary, a remortgage could help a homeowner save money. It is such a smart strategy that some homeowners are taking on penalty fees to end their term early and remortgage with current rates rather than wait till their term ends and possibly pay with higher rates.

Not only could choosing a remortgage over a SVR save money, but with a remortgage there is the ability to choose a fixed rate deal. Locking in a current rate and shielding against further rate hikes offers stability to a household budget and avoids further costs coming out with higher interest rate expenses.

Luckily, it is quick and simple to shop for a remortgage by doing so online. Visiting the website of a remortgage broker could put numerous quotes from a variety of lenders into the hands of the homeowner to review and compare to find the best remortgage deal. The homeowner could also visit website to website of remortgage lenders to gather quotes. It should be noted remortgage brokers often have exclusive deals from lenders not offered directly to borrowers, so visiting a remortgage broker website for quotes could result in a special opportunity.

The next MPC meeting is nearing, and another rate hike is likely. Rather than continue to stress about rising rates and face paying more than necessary, homeowners are encouraged to shop for a remortgage to save money, lock in their chosen rate with a fixed rate deal, and perhaps find peace of mind in this ever-changing economic environment.