The Bank of England’s Monetary Policy Committee (MPC) has been battling against inflation since December 2021. It was then the MPC chose to increase the standard base interest rate from its historic low for the first of what would be thirteen consecutive meeting votes to hike the rate. It has risen from almost zero at 0.1% to the now level of 5.0%. The quick transformation of the lending market has left borrowers struggling and perhaps the most impacted have been homeowners.

There have been ideas floated that perhaps the government would consider how difficult homeowners are having it in this economic environment and consider assistance of some sort to help. There have been discussions of financial assistance in requiring lenders to provide relief if homeowners fall behind in repayments to a hold on the MPC increasing the rate further for at least a specific time period. However, the ideas are not likely, including a hold of rates, because inflation is seen as more of an economic problem overall and further interest rate hikes will be required.

Inflation was last reported at 8.7%, which is more than four times the target rate of 2.0% set by the Bank. This indicates there are many more rate hikes to come. The peak rate forecast has grown several times in just the last month. It had been under 6.0%, but now some are calling for a peak interest rate of more than 7%.

There is concern inflation could remain stubborn and above target level for longer than expected. Recently there is worry wage increases to meet the cost of living are going to sustain inflation as consumers then have more money to spend. The idea of increasing interest rates is to slow spending, lower demand in the markets and as a result supply grows as prices decline bringing inflation under control.

The housing market is usually one of the economic markets that is quickly impacted by higher interest rates, but it has remained resilient. It may not be performing as boldly as it did during pandemic lockdowns and shortly after, but home buyers have been slow pulling back. Higher interest rates have not dampened their confidence in buying. 

The resilience of the housing market had a positive side for homeowners as there was little worry of what normally is a concern when interest rates increase and that is lower demand which causes house prices to drop and in turn property values decline. If a homeowner does face declining property value, they could end up in negative equity which is when the value drops below the level of debt on the property. 

In negative equity, the homeowner is out of reach of the one thing that could actually help them save money when interest rates rise, and that is a remortgage.

At the end of a homeowner’s mortgage term, they can choose a remortgage or allow their lender to move their loan to the lender’s standard variable rate (SVR). A SVR is usually higher than the rate found with a remortgage so by avoiding the SVR a homeowner could save money overall. Also, a remortgage allows for the choice of a fixed rate which would shield the homeowner’s budget from further rate hikes. 

Homeowners choosing fixed rate mortgages two years ago when lenders were offering their own historically low interest rates are coming to the end of their two-year fixed rate mortgages. The difference in interest rate offers then and now are vast. It could be a difference in hundreds or even thousands of dollars in repayments. Those that cannot absorb the higher cost of borrowing could face affordability issues. Here lies the concern of experts that have been warning homeowners to prepare for higher interest rates since 2021. However, it still is an issue today because interest rates are due to climb even higher.

Inflation may remain above target for some time and more rate hikes will be required. Unfortunately for homeowners coming to the end of their mortgage term, it could cause financial strains. On top of that issue, homeowners are now being warned the housing market is shifting. House prices are stalling or even declining in some areas. Another rate hike or two could cause property values to begin declining, and as previously mentioned negative equity is a true threat.

Remortgaging sooner rather than later could allow a homeowner to borrow when it is more favorable for them to find the best remortgage. Waiting could cause them to miss out on lower interest rate choices and have them choosing from fewer remortgage products in a tightened lending environment. For some, the choice will be out of reach if they decline into negative equity.

It is a smart strategy to remortgage and some homeowners are choosing to take on a penalty fee to remortgage early and have the option of lower interest rates rather than wait out their term and perhaps face higher ones later.

It is easy and quick to discover what opportunities are available in remortgaging. A homeowner has simply to visit the website of a remortgage broker to gather quotes from a variety of remortgage lenders in a one stop online shopping experience. Shopping online with a broker is a no obligation experience and a homeowner could discover an exclusive deal from a lender not offered directly to borrowers. Homeowners could also go from lender website to lender website to gather quotes to review and compare.

Once a remortgage offer is in hand that is favorable to a homeowner’s unique financial needs, it is suggested that there be no hesitation as the lending market has been changing rapidly day to day as lenders evaluate their risk in lending to homeowners. The best remortgage offers are more likely to be available today versus tomorrow.