The news that inflation was on a downward trend is good, especially for homeowners having to endure so many impacts to their household budget. Inflation has long been a source of financial pain to homeowners as energy, fuel, food, services, and products all were taking more money away from their budget. In response to the double-digit inflation growth, the Bank of England’s Monetary Policy Committee (MPC) began in December 2021 increasing the standard base interest rate to combat inflation and bring relief to the economy. It added higher interest rates to the woes of household budget strains.

That first increase to the rate in years was a change from the many cuts that had occurred during the pandemic. At the beginning of December 2021, the base rate was almost zero at 0.1%. The MPC meeting pushed it upward by more than double to 0.25%. In fourteen consecutive MPC meetings, the rate has increased. It now sits at 5.25% and will likely continue to be increased throughout 2023 according to experts.

The next meeting of the MPC is 21 September and the rate could be increased by the 0.25% that was voted on in August or the 0.50% increase voted on in June. Either increase, which would take the rate to 5.25% or 5.75% would push the rate to the highest since 2001. The higher base rate of the Bank will, of course, not be the rate found with lenders, so expecting higher than the base rate is the reality for borrowers.

Homeowners coming to the end of their pandemic chosen historically low fixed rate this year or next will face much higher costs in borrowing. 

At the end of one’s mortgage term, the homeowner has a choice of remortgaging to a rate of their choice or allow the lender to move them to their higher and therefore more costly standard variable rate or SVR. Avoiding a SVR in favor of a remortgage could save a homeowner money. Choosing a fixed rate remortgage could save them even more by shielding them from further rate hikes ahead.

Forecasts for inflation coming under control are for early 2025. Rate hikes are likely to be necessary to continue the downward movement of inflation, and certainly the MPC will not lighten the impact of higher interest rates to tame it and bring it under control. 

A homeowner coming off a historically low fixed rate remortgage of two years ago to rates of today could see their monthly repayments increase by hundreds of pounds, and the overall cost of their loan increase by thousands just due to higher interest rates. Only a quarter of a point increase could have a substantial impact on affordability for some homeowners.

The ability to avoid a SVR and obtain a fixed rate to save money against rising rates in the future is available through remortgaging. 

The first step is to take a deep breath and exhale slowly while accepting there is no way to hold on to your ending historically low interest rate. It is gone. The strategy for now is to find a way to avoid paying more than necessary. Rate choices today are not going to look like they did two years ago or even five years ago, but savings are possible in terms of what one could pay by making certain choices in remortgaging.

The next step is to get acquainted with one’s current mortgage. It could come as a surprise that one might think a two-year deal means 24 months. However, reading the fine print on a mortgage deal could reveal the two-year fixed rate mortgage actually means 21 months before converting to the lender’s standard variable rate (SVR). Avoiding the SVR is important, so knowing exactly when the mortgage term will end is an important start to building a strategy to save money.

A homeowner could start shopping for a remortgage at any time. It allows them to determine what deals they are currently qualifying for and what savings are in reach. Those close to having their deal end could secure a remortgage choice and sit on their current fixed deal and have it switch immediately upon the expiration of the mortgage term. Others may wish to remortgage early to allow the choice of deals now versus when their deal would end should it be more than six months out.

It goes without saying that those already on a SVR should take advantage of what a remortgage could do for their budget and start shopping for a new deal immediately.

Remortgage shopping online is quick and easy. It involves no commitment from the homeowner. In a matter of minutes on a remortgage broker website, a homeowner could have numerous quotes in hand from a variety of lenders. Brokers also could offer exclusive deals from lenders that aren’t available directly from lender to borrower. The homeowner could also go from website to website of remortgage lenders to obtain remortgage quotes to review and compare in preparation of making their strategical choice to save money.

The economy has changed drastically in recent years, and the impact on many households came without warning as those not used to weathering economic turns may have not considered how it would impact them directly.

For homeowners struggling to make repayments, contacting your lender as soon as possible could prove to be advantageous. Shopping for a remortgage sooner rather than later is another important step. The historic low rates of years ago are gone. The lower rates of this time last year are as well, and the ones of today could look much better in comparison to what is ahead. 

The time to shop for a remortgage was yesterday, and tomorrow could have a homeowner missing out. Since online remortgage shopping is fast and simple to do and available 24 hours a day, there is always time for building a strategy to save and protect one’s future financial health in the uncertain economic environment of which we will exist for years ahead.