In the coming months, millions of UK homeowners are going to be facing a tough financial situation when their mortgage term ends. Many are due to have their mortgage term end within the next six months. If they choose to remortgage, they will have much higher interest rates offered than before, but should they choose not to remortgage the interest rates they will face when they are moved to their lender’s standard variable rate (SVR) could cause a financial strain they are not expecting. It is often reported that the average SVR could be twice or more the interest rate level connected to a remortgage.

Homeowners that secured their mortgage with a two-year deal during the early part of the pandemic will have obtained their current deal when the Bank of England’s standard base interest rate was at an all-time historic low. The rate during the pandemic was 0.1%, but it has increased during each of the last six consecutive Monetary Policy Committee (MPC) meetings and now stands at 1.75%. Lenders, of course, are offering interest rates higher than the Bank’s base rate. 

A recent forecast calls for the MPC to increase the rate to 4.0% or higher by the early part of next year to handle the ever rising inflation rate. Inflation could increase to 18% next year which will put pressure on the MPC to respond aggressively as inflation data is reported.

The MPC meeting in August resulted in the highest increase in almost three decades by 0.50% and there are many experts expecting the September meeting to result in a minimum increase of another 0.50%, but it could always be more. There is not a MPC meeting in October, so the September meeting could result in a major statement by the MPC to cover two months of work against the inflation rate. 

Homeowners are likely to be shocked at how much a repayment will increase due to the higher interest rates. Some will have prepared and have their budget ready to handle the higher expense, but others could be shocked and caught unaware.

Experts are encouraging all homeowners to shop for a remortgage. Through remortgaging a homeowner could find relief from the rising rates. By choosing a fixed rate remortgage, they could lock in a rate throughout the duration of their term and not have to endure further increases despite the MPC decisions. 

According to a report released by LMS, in July, 70% of remortgages were five-year fixed rate remortgages. The most popular reason for remortgaging was to release equity built up in the property into cash. An equity cash release remortgage allows the homeowners to turn equity into cash they can use as they wish. Some are thought to be upgrading their heating systems to be more energy efficient before winter, while others are paying down debt, paying for a holiday, or for simply building an emergency fund.

Shopping online for a remortgage is quick and simple. In a matter of minutes when visiting a remortgage lender, the homeowner could have a quote in hand. Visiting the site of a remortgage broker could put several quotes in hand from various lenders. It could also result in an exclusive deal from a lender not offered directly to borrowers, but only through a broker.

Once quotes are in hand, a homeowner will have valuable information that could help them decide the right action to take for their financial situation. With the opportunities and benefits available through remortgaging, a few minutes of time invested in gathering quotes could be the smartest strategy choice to be made in the current economy.