It Might Be Too Late to Remortgage before the Rate Hike but Attractive Deals Remain
While there has been much made of lenders quickly increasing their offering interest rates prior to this week’s meeting of the Bank of England’s Monetary Policy Committee (MPC), it doesn’t mean there are not attractive deals still to discover and savings to be had. Two-year UK mortgages have been put on the lending market above 6.0%. In yet another indication of what is in store for homeowners, the UK two-year gilts passed 5.0% ahead of the MPC meeting, which could mean remortgage rates would rise even further.
Some polls taken of economists prior to this weeks MPC meeting have resulted in a 100% consensus that there will be another hike to the standard base interest rate on Thursday. If so, it will be the thirteenth consecutive meeting in which the base rate has been raised.
It should be noted that following the June meeting there is not one scheduled for July, rather the next meeting will take place in August. The missed opportunity to take action against inflation next month could result in the MPC taking a more aggressive stance and increasing the rate this week not by 0.25% but by 0.50%.
In December 2021, when the rate first began to rise following the historic low due to the global pandemic, the base rate was increased from 0.1% to 0.25%. Then, the more than double increase was thought to catch some homeowners unaware, and the warning of more rate increases to come was a constant noise in hopes of allowing homeowners to prepare. Many did, and some even chose to remortgage early to secure the lower rates back just over one year ago, versus awaiting the end of their mortgage term.
Now the base rate sits at a high not seen in over a decade at 4.5%.
Unfortunately, there were many that believed the rate from just months ago would decline, mainly due to the hardships put on homeowners coming to the end of their mortgage term. However, the increases to the base rate are due to the stubborn level of inflation. When inflation increases, the tool to bring it down is to raise rates and curb spending. In most economic situations, it helps, but it has failed to rapidly bring the once double-digit inflation rate closer to the target of 2.0%. Some believe consumers coming off the pandemic and the attempt to return to normal has kept spending strong despite higher interest rates.
For homeowners, especially those yet to shop for a remortgage, the financial strain could come all at once. At the end of a mortgage term, of which there are many that will do so this year having borrowed when the Bank’s rate was at its all-time historic low, the homeowners have the choice to remortgage or allow the lender to move them to their standard variable rate (SVR). The SVR is considered risky for those that are more financially comfortable, and even more so when rates are climbing and expected to continue to climb.
With remortgaging, not only can a homeowner save by avoiding the risk of the usual higher rates connected to a SVR, but they can save by the opportunity of choosing a fixed rate and locking in their rate during the length of their new term. Because there are more rate hikes expected, not only by the Bank but by lenders, locking in a rate could be a smart strategy to save against each further rate hikes ahead.
It is easy to shop for a remortgage online. Doing so offers quotes to review and compare. It is a one-stop shopping experience to visit the website of a remortgage broker. They work with numerous lenders and by visiting their site, a homeowner could have many quotes from a variety of lenders in hand within minutes. Brokers could also have an exclusive deal not offered directly from lenders to borrowers. Going from website to website of remortgage lenders could also offer quotes to compare.
Once the homeowner has quotes in hand, they can determine which remortgage is the best option. Experts remind homeowners to consider the fees and other costs associated with offers. The lowest interest rate remortgage could have higher fees, while one with a slightly higher interest rate could have incentives such as no fees and free valuations. Looking at all costs and fees involved will help the homeowner determine which deal truly offers the best savings for the months and years ahead.