There are many homeowners coming to the end of their mortgage term this year. There are a sizable number of those ending that are two-year fixed rate deals obtained in 2022 when the Bank of England’s standard base interest rate was coming off of an historically low base rate of 0.1%. By March 2022, the Monetary Policy Committee (MPC) had increased the base rate for three of what would become fourteen consecutive meetings of rate hikes. Two years ago, this month the base rate was only 0.75% and lenders were offering cheap mortgage and remortgage deals.

The 2022 obtained two-year fixed rate deals are ending this year and the base rate is now 5.25% and lender rates are closely linked to the actions of the MPC. Which means the rates then compared to now are much different and current lender deals are much more expensive resulting in higher repayments.

Because there is so much talk of a soon to be rate cut by the MPC, many homeowners could be waiting out for lower interest rates to remortgage. Meanwhile, if their mortgage term has ended or soon will, without a remortgage the homeowner will be moved to their lender’s standard variable rate (SVR). Experts encourage homeowners to avoid a SVR for many reasons, because it can change unexpectedly which is risky for those better suited to avoiding fluctuating repayment amounts, a SVR does not allow a fixed rate opportunity due to being a variable rate loan, and a SVR could have a much higher interest rate.

Paying a higher, variable interest rate rather than securing a lower rate remortgage, choosing to pay more than necessary is like throwing away money. Surely, no one wants to just pay more than they need to pay, if that is the case then it would be better to give the money to charity than just passing it along due to making a financial choice that is likely to turn out to be a mistake.

Holding out for lower rates for a remortgage is not likely to be the best strategy. Currently, interest rates are incredibly attractive. There had been a competitive lending environment that started to develop in February. Optimism in the economy slowly shifted and lenders began to pull their lowest interest rate offers. By the time the MPC held their March meeting, the majority of lenders had pulled at least a few of their best deals.

However, the report on inflation brought new optimism as it declined strongly from 4.0% to 3.6%, which brought it closer to the Bank’s target to 2.0%. The MPC held their meeting and despite voting to keep the current base rate of 5.25% steady, the vote did not include any members voting for a rate hike which was the first time in two years that had occurred. Instead, there was one vote of the nine for a rate cut.

Experts began to forecast possibly three rate cuts by the end of the year. Some expect the first cut by June while others forecast the first cut by the end of summer in August. However, the cuts are not due to be large, but rather small ones of possibly 0.25%. If at that full amount is voted in cuts three times by the end of the year, the base rate would be 4.75%. 

There are many remortgage deals already on the market under or at that level. In early March, there were more under the base rate level, but even after lenders removed some off of the market, there are still attractive deals to be found.

All things remaining constant in the UK economy, with no setbacks due to global economic uncertainties, the base rate will likely be cut but there lender rates will not decline to the choices available in 2022. What borrowers could choose then was due to the pandemic, and the economy is healing. Even if the Bank lowers the base rate, lenders might feel they are at rate levels efficient for borrowers as well as their own business goals and lender offers might not differ at the end of the year much from what is available now.

If lenders do lower rates, the savings from current rates would likely be minimal in comparison to skipping on a remortgage and choosing to pay on a SVR. The loss in savings by skipping on a remortgage would probably be more than the difference in remortgage rates now and by the end of the year.

Whether to remortgage or allow a lender to transition a term expired mortgage to a SVR is a personal financial choice for every homeowner. For those looking for savings and peace of mind, a remortgage is certainly the strong choice. 

Shopping for a remortgage online would offer essential information for coming to a decision and building a strategy. It is quick and easy to visit the website of a remortgage broker and get quotes from a variety of lenders. Brokers could have exclusive deals from lenders not offered directly to lenders. Going from one lender website to another is also a method of gathering quotes to review and compare.

Waiting out for a strong decline in lender remortgage offers and taking on a SVR is not likely a savings strategy and is instead a choice to pay more than necessary. By shopping for a remortgage and avoiding a SVR, a homeowner could be keeping more in their household budget.