Unfortunately, in a matter of a week, things have changed drastically for homeowners that were playing the waiting game on whether or not to remortgage. Those that took action rather than risk higher rates likely obtained an interest rate that has already disappeared. Due to the less than expected adjustment to the inflation rate, lenders last week began to pull their best mortgage and remortgage offers and are replacing them with higher rates. Some products are at rates almost a full percentage point than offered the prior week. Borrowing has once again become more expensive.

Inflation had previously been reported at 10.1%, which is more than five times the target rate set by the Bank of England of 2.0%. The forecast was for the many interest rate hikes by the Bank’s Monetary Policy Committee (MPC) to provide a steep decline toward target and a hopeful lower rate closer to 8.0%. However, inflation was reported closer to 9.0% at 8.7%.

The less than favorable inflation decline was a signal of not only more rate hikes to come from the MPC, but perhaps more aggressive ones. The upcoming MPC meeting is set for 22 June. There will not be a meeting in July, with the next meeting scheduled for 3 August. The longer wait between meetings could push the MPC to increase the base rate by a higher increment rather than the recent trend of only 0.25%. If the committee does vote for a 0.50% increase, the rate would rise to 5.0%. It would be a difficult increase on households already strained, but a necessary one to control consumer demand and lower the UK’s rate which is much higher than in other countries.

Increasing the interest rate is seen as the main tool to lower inflation. With higher borrowing costs, spending and demand decline and supply grows which lowers pricing. This can be said of not only food pricing and retail pricing, but with other consumer products and services as well.

It might be a necessity to rebalance the economy, but it comes as little consolation for homeowners struggling with affordability due to their higher cost mortgages. 

There are thousands of home buyers that purchased their properties two years ago when the Bank’s rate was at an all-time historic low due to the economic impact of the pandemic. Lenders offered their own historic low rates to home buyers making mortgage borrowing cheaper than it had ever been in the history of the lender.  

The most popular mortgage products at the time were fixed rate deals, especially two- and five-year fixed rate mortgages. Those that secured a two-year fixed rate deal or remortgage have either come to the end of their term or are nearing it. At the end of their term, their protection from rising rates will expire as well as their historically low interest rate. Either they will choose to remortgage to a new rate and term or allow their lender to move their loan to the lender’s standard variable rate (SVR).

A SVR could be double or more the rate found with a remortgage. By remortgaging and staying off the lender’s SVR, the homeowner could save a substantial amount of money every month. Not only could they save from avoiding a SVR, but a remortgage would allow for a fixed rate deal to protect against further rate hikes.

Experts encourage homeowners to shop online for a remortgage. Visiting the website of a remortgage broker could in mere minutes put various quotes from different lenders in hand to review and compare to find the best remortgage. Brokers often have exclusive deals from lenders not offered directly to borrowers. It makes shopping for a remortgage a one-stop shopping experience. Of course, picking specific remortgage lenders to gather quotes from could also be done by visiting each of their websites.

No matter where a homeowner is in their mortgage term, whether already moved to a SVR, nearing the end of their term, or with plenty of months to go, shopping for a remortgage could offer valuable information in which to use to make a smart financial strategy. It could make the difference in helping a homeowner endure the possible hard economic times ahead by easing the burden and saving money.