Homeowners are struggling according to the results of a recent poll of advisers by Mortgage Solutions. A large number of Help to Buy homeowners are having difficulty remortgaging according to 71% of the advisers. In another report, this one by The Telegraph, there is a large number of first-time home buyers that have slipped into arrears with the number doubling over last year to 4,845. There are many reasons that could explain the hardship of first-time buyers meeting their repayments, but there could also be blame for the fact that some would have not taken into consideration what would happen when interest rates increased.

When home buyers shop for a home and a mortgage, few are considering the future and the expectation of higher interest rates. They are navigating the here and now and awaiting the opportunity to climb onto the property ladder. Few are likely asking questions about what higher interest rates could mean to their financial responsibility. Fewer still would have asked questions about whether the interest rate could double or more in less than two years from their purchase date.

It was two years ago that the Bank of England’s Monetary Policy Committee (MPC) met and voted to increase the standard base interest rate for the first of what would be fourteen consecutive meetings with a rate hike. The December 2021 vote moved the rate from the all-time historic low of almost zero at 0.1% to 0.25%. That vote alone resulted in a more than a double rate hike, but by December 2022 the base rate had reached 3.5%. 

The current Bank rate is 5.25%. The next MPC meeting is this Thursday, and the expectation is that the rate will remain with no increase. 

Yet, it is shocking to a budget for a mortgage that was secured with a two-year fixed rate offered when the base rate was at a historic low, to then two years later face rates offered while the base rate is higher than in the past 15 years. For when a homeowner’s mortgage term ends, so does the rate. It is then the homeowner will either remortgage or allow their lender to move them to their standard variable rate (SVR). 

Experts encourage homeowners to avoid the SVR and instead remortgage due to the savings that could be found. The remortgage not only will have the lower interest rate but will allow the choice of a fixed rate to offer peace of mind that the rate is locked in for the rest of the term and protect against rate hikes in the future.

It is easy to shop for a remortgage online. A homeowner can gather quotes from a variety of lenders by visiting the website of a remortgage broker to review and compare quotes or by going site to site of lenders to gather quotes.

Unfortunately, many homeowners are caught unaware of what will happen at the end of their mortgage term. Some are hopeful that when their term ends the interest rates will be near to their then choices, while others may not have even understood how even a slight increase in an interest rate can amount to a substantial amount of money.

The current economy has taken a toll on homeowners. There was the global pandemic, then double digit inflation followed by higher interest rates. For those coming to the end of their fixed rate deals having secured a mortgage at the end of 2021 or in 2022, the cost incurred due to the present-day interest rate offers could cause affordability issues.

Some homeowners will find themselves stuck with their current leader and others will be held prisoner to their mortgage as they are moved to the SVR and cannot remortgage to get a better rate. Their choices will be few and that could result in their paying more than necessary.

Homeowners need not wait until their term ends to shop for a remortgage. Any homeowner can shop online for a remortgage, and they actually should as the information is enlightening as to what deals are available. 

It is with quotes in hand that a strategy can be built to save as much as possible. Without quotes, it is choosing to take a risk, or miss out, which is unnecessary when it is so easy to shop for a remortgage online.