Experts have been concerned for homeowners and their ability to afford their mortgage repayments due to rising interest rates. Their warnings have grown for those coming to the end of their two-year fixed mortgage terms this year due to their need to move to interest rates of today from those offered when rates were historically low. The difference in their repayments could be hundreds of pounds more per month. The best strategy according to experts to make the most of any savings possible would be remortgaging.

In a little over a year ago, the Bank of England’s standard base interest rate was at an all time historic low. In over 300 years, the rate had never been lower as it remained at 0.1%. The global pandemic impacted economy had required the Bank of England’s Monetary Policy Committee (MPC) to reduce the base rate to the historic low and borrowers benefitted while keeping the economy flowing.

Borrowers found the housing market too attractive to overlook. Not only were first-time buyers brought into the market, but home movers and holiday home buyers as well. Demand in the market was not only fueled by historically low interest rates but also by the pandemic lifestyle requirement for more space inside and outside the home. 

Many of those homeowners secured the popular fixed rates which locked in the interest rate throughout their term. This proved beneficial as the MPC began the first of eleven consecutive rate hikes in December 2021. Since then, homeowners with historically low fixed mortgage rates have been paying on their low interest rate and shielded from rising rates.

Time has passed and those with two-year term fixed rate mortgages are coming to the end of their term. The choice to remortgage or allow their lender to move them to their standard variable rate (SVR) will not offer the same low rates previously shopped. The difference between their historic low rate and the ones found currently could cause repayments to increase by hundreds of pounds.

However, there are ways to save and make sure the repayments are not more than necessary. This is where remortgaging plays a role and why experts have long been encouraging homeowners to shop for a remortgage and do so early. Homeowners don’t have to wait to remortgage and are usually penalty free to move to a new deal six months before their term expires.

While rates are vastly different due to increases by the MPC, there are still savings to be found with a remortgage as it saves the homeowner from being moved to their lender’s standard variable rate (SVR). The rate levels of a SVR could be double or more those found with a remortgage. When a remortgage could offer an interest rate lower, and in some cases 50% to 75% lower, the opportunity to remortgage should not be missed.

Discovering what savings are available with a remortgage is simple by shopping online. Visiting the website of a remortgage broker could put numerous quotes from a variety of remortgage lenders in hand to review and compare in a matter of minutes. Brokers could also have exclusive deals not offered from lenders directly to borrowers. Of course, homeowners could go website to website of remortgage lenders to gather quotes to compare.

Another possible savings would be choosing a fixed rate remortgage as it could keep the homeowner’s budget safe from further rate hikes. It is unknown at this point how many more rate hikes will be required by the MPC to bring inflation downward and closer to the Bank’s target of 2.0%. Inflation was last reported at more than five times the target rate at 10.1%, which is why the next MPC meeting is expected to result in another increase. If so, it will be the twelfth consecutive meeting with an increase to the base rate and will take it above the current rate of 4.25%. The forecast is for at least a 0.25% increase which will result in the base rate at 4.5% on 11 May.

A fixed rate remortgage would help the homeowner from any further rate hikes and therefore offer savings.

There are those that believe rates could likely drop after inflation begins to decline, but no one is expecting rates to return to the historic low levels that were available before December 2021. Higher rates are the new reality and homeowners need to prepare to be able to find savings versus paying more than necessary. However, those homeowners expecting a rate hike are not restricted to a fixed rate but could consider a tracker or variable rate remortgage to allow savings should rates indeed decrease once inflation begins a downward trajectory. Those choices would still likely offer substantial savings over a SVR.

Because remortgage brokers work with a variety of lenders, getting to a remortgage savings quicker could happen by shopping with them over taking the time-consuming effort of gathering offers from lenders one by one. Since brokers could also have exclusive deals, it is even more of a smart strategy to shop with a remortgage broker. It should be noted that since brokers work with many lenders at one time, they are considered in the know of which lenders would likely work with a homeowner that has a unique remortgaging situation. This would save the homeowner from stressing through lender to lender trying to find the right opportunity. Overall, it could be a more streamlined and less hectic and time-consuming strategy to work with a remortgage broker which means getting to savings quicker.