Homeowners are being encouraged to shop for a remortgage when they are nearing the end of their mortgage term. If they want to not pay more than necessary, then avoiding their lender’s standard variable rate (SVR) is the best strategy. Without remortgaging, they will be at the mercy of a risky SVR which is normally a higher rate and has been known to be double or more the interest rate that could be found with a remortgage. Also, it is a variable rate which could fluctuate whereas with a remortgage the homeowner could choose a fixed rate and lock in their chosen rate and have the same monthly repayments. Unfortunately, there are homeowners that simply don’t know a remortgage is an option or they believe the remortgage is going to make them take on more debt rather than offer them savings and peace of mind.

At the end of a mortgage term, the homeowner could choose to remortgage or allow their lender to transition them to a SVR. The main benefits of a remortgage have been discussed such as a lower interest rate and a fixed rate deal. The peril of a SVR is more expensive costs to borrowing, a rate that could easily change at the choice of the lender, and with higher interest rates comes higher repayments.

Lenders often will raise and lower their SVR outside of any decision of the Bank of England’s Monetary Policy Committee (MPC) and a homeowner could unexpectedly be told they will now have higher repayments. Unless their budget could handle such fluctuations, it is best to avoid a SVR. 

Many homeowners could be unaware of losing out on their current mortgage when the term ends. They may believe it simply is the end of a time period in which they can then choose something different or stay as is with their current interest rate. Having the term end and their interest rate end as well has likely never been such a financial shock as it is currently due to the vast difference in lender rates just two years ago to now.

In March 2022, when many hopeful home buyers and homeowners were seeking mortgages and remortgages, lender rates were exceptionally low. The MPC had their monthly meeting, the second of the year in March, and voted to increase the base rate from 0.50% to 0.75%. The current base rate is 5.25% and in comparison, the difference in the cost of borrowing is substantial in what it was in 2022 versus now.

It is no surprise borrowers in 2022 were rushing to complete their loans. In December 2021, the base rate was almost zero at 0.1% until the MPC increased it by more than double to 0.25%. It is hard to imagine that increasing the base rate by more than double took it to such a low level, but it caused a rush to borrow as it was warned the MPC would be making more rate hikes. 

By the time the MPC had reached the peak rate to control inflation, there had been fourteen consecutive meetings in which the base rate was increased. It has held steady since September of last year.

Despite the rate being held steady by the MPC, in February lenders began to lower their own rates. It took only a few weeks for the competition for the attention of borrowers to push mortgage deals below the base rate. Almost as soon as the lower interest rate offers arrived, lenders began to pull them due to the lack of confidence in the upcoming inflation report, for the last two reports revealed inflation steady at 4.0%.

The inflation report revealed it had dropped to 3.6% in the twelve months to February. Optimism could trigger lenders to keep their current low deals and offer more in the days to come even if the base rate remains at 5.25%.

Lenders can and do change their rate offerings without the direction of the MPC. Borrowers aren’t always at risk of such differences in payments with a SVR, but they are at risk of losing money. A remortgage will likely offer a lower rate, and a more stable rate with a tracker or fixed rate deal. 

Household budgets were strained by Brexit, then a global pandemic, higher energy costs, and inflation. Paying more with a SVR is not what most would want when a remortgage could save money and offer stability with less stress and worry, especially after the strain budgets have felt for so many years.

Homeowners could with a remortgage borrow money against their built-up equity, they could cash out their equity and use the money as they wish, they could remortgage to extend their loan into a longer period and lower their repayments. Homeowners could in some situations remortgage to an interest only deal to lower their payments. Remortgages offer many options and benefits, but mostly they will be sought out after a mortgage term ends so a homeowner can avoid a SVR and save money.

Interest rates choices now are not going to be at the low level a homeowner might be paying on a two-year fixed rate deal obtained in 2022. However, a remortgage in 2024 could save money over being moved to a SVR. 

Homeowners can easily and quickly determine what remortgage offers are available by shopping online. Visiting the website of a remortgage broker could offer up quotes from a variety of lenders in only minutes. Homeowners could also visit the websites of remortgage lenders one by one to gather quotes. Step by step or quick and easy, gathering quotes to review and compare will help homeowners determine what deals are available and how they could save and find security at the end of their mortgage deal.