The Bank of England has reported that over half of UK homeowners will experience higher mortgage repayments during the next three years. About one third of the homeowners have so far been shielded from the higher interest rates that began after the pandemic due to their current fixed rate mortgages. It was in December 2021 that the historically low standard base interest rate of 0.1% began to rise and by August 2023 had risen to 5.25%. Between 2021 when the base rate reached a peak of 5.25%, homeowners who chose a fixed rate mortgage or remortgage might have chosen a rate much lower than the current offers from lenders.

At the end of their current fixed rate deal they will either allow the transition of their mortgage debt to their lender’s standard variable rate (SVR) or with an opportunity to save money choose a remortgage deal. A SVR could have a much higher interest rate than what would be found with a remortgage. Actually, a SVR could be double or more the average remortgage interest rate available from lenders.

The Bank’s financial policy committee estimated 420,000 homeowners could find their household budget strained by an increase of £500 per month.

Rather than pay more than necessary, experts encourage homeowners to shop for a remortgage. This would be especially important for those already moved to a SVR, but homeowners nearing the end of their current term or within six months could likely discover savings. 

Those that were a few years prior able to choose an historically low lender rate or just slightly above will not find such interest rates on the market but they would certainly find savings with a remortgage than allowing a SVR to be their new borrowing cost indicator. 

Over 4 million households are likely be facing higher interest rates over the next three years, and shopping for a remortgage will be an important strategy in seeking the most affordable rate. It is easy and quick to shop online for a remortgage. A few minutes on the website of a remortgage broker could offer numerous remortgage quotes from a variety of lenders and possibly even exclusive deals not offered directly from lenders to borrowers. One may also choose to go from website to website of lenders to gather quotes. 

No matter where a homeowner is in their current mortgage term, shopping for a remortgage will offer valuable information. It could provide information so the homeowner could avoid a SVR or leave one behind and save money. It could also help a homeowner prepare for a future date when their term will end as to what would be expected so savings could be put aside for the expected higher cost of borrowing.

Most homeowners are able to remortgage up to six months before the end of their term without having to pay a penalty fee for ending their deal early. However, paying the fee might be a consideration for those that obtained their deal within the last year, because interest rate offers are much lower than they were this time last year.

The Bank’s Monetary Policy Committee (MPC) has cut the base rate two times this year, once in August and the second in November pushing the base rate from a sixteen year high of 5.25% to 4.75%. The initial cut to the base rate in August was the first reduction voted on by the MPC since March 2020. 

Because of the growing confidence in the economy and inflation hovering near the target rate of 2.0%, lenders have grown competitive in their offers and there are mortgage and remortgage offers near and below the current base rate of 4.75%. This is motivation for online shopping for a remortgage sooner rather than later.