The economy may be headed toward healing and normalizing in regards to inflation, but the gains toward stability of the economy have yet to reach consumers. The financial struggle of households is still very much that, a struggle. The global pandemic took its hits, followed by double digit inflation, and higher interest rates caused more woes for borrowers. The shock to household budgets has been particularly hard due to higher costs in borrowing. In fact, it was recently reported that homeowners in mortgage arrears had increased by 24% over the same time last year. 

The UK Finance reported on the difficult issue of higher interest rates on homeowners and home buyers and stated that home buyers are finding it difficult to get onto the property ladder, especially those with lower incomes. It is not surprising that this is so, considering that in December 2021 the Bank of England’s standard base interest rate was near zero at 0.1% and now stands at 5.25% two years later. 

In December 2021, the Bank of England’s Monetary Policy Committee (MPC) increased the standard base interest rate from 0.1% to 0.25%. It was the first of what would become fourteen continuous MPC meetings with a rate hike to tame inflation and bring it to the target rate of 2.0%. The Bank’s rate was kept steady in September of this year and continued as the meetings voted confidence in perhaps the current rate being the peak rate, and no further increases would be needed.

While some home buyers have been pushed away from the housing market due to higher rates, homeowners have had the rates pushed upon them with some being caught unaware.

Many secured their mortgage when the rates were at historic lows, allowing them to get into properties that if rates had been higher it would have likely caused affordability issues, or they were able to borrow and with the lower rate it was possible to balance out costs despite inflation. However, inflation and higher interest rates make it difficult to juggle.

Securing a fixed rate mortgage when rates were low, and perhaps at historically low levels, and having to pay rates that are higher than they have been in a decade would be difficult. It has put many people in arrears. 

It is when a mortgage term ends and the fixed rate is gone that the extra costs begin. Many new homeowners might have been unaware of how rising rates would impact them. They might not even have been aware they could remortgage. Without a remortgage, the homeowner would be transitioned onto the lender’s standard variable rate (SVR) and some lender’s rates could be double or more the available rate offered with a remortgage. 

Because of the possible savings of a remortgage over a SVR, as well as the ability to secure a fixed rate for peace of mind, homeowners that have been moved to a SVR are encouraged to consider a remortgage. Certainly, those that find themselves paying more than 6%, possibly 8%, should shop for remortgage offers currently available. 

Some lenders have begun to offer rates below that of the Bank’s standard rate, and while those are few and likely only for those with appropriate leveled LTVs and a great credit history, there are remortgage offers that could assist a homeowner in not paying more than necessary. The savings could be substantial.

Shopping for a remortgage is simple and easy. A few minutes online would result in a remortgage quote or quotes. Shopping the website of a remortgage broker could not only possibly provide an exclusive deal from a lender not offered directly to borrowers, but it could also offer numerous quotes from a variety of lenders to review and compare. Homeowners might also shop individual lender websites for quotes.

While a remortgage is a suggested strategy, there are some homeowners that are not ready for a remortgage as they would endure a hefty penalty to end their term early. In this case, experts encourage them to talk with their lender should they be finding it difficult to afford their repayments. Doing so as soon as possible is better than waiting until there is little to be done to help.

Eric Leenders, managing director of personal finance at UK Finance, advised, “If anyone is struggling with personal loan, credit card or mortgage repayments, please reach out to your lender as soon as possible for help.”

Meanwhile, others who could benefit from a remortgage should shop for one sooner than later. The information found in a matter of minutes online could lead to savings and peace of mind.