It is certainly no surprise that remortgage demand has increased. Lenders have been competitive and are offering attractive deals. Some of the deals are unexpected as they are below the standard base rate of the Bank of England. The deals are so good considering what they could be, and they might possibly disappear as quickly as they came onto the lending market. This is why experts are encouraging all homeowners to shop for a remortgage and discover what saving they might find.

The Bank’s Monetary Policy Committee (MPC) left the standard base interest rate steady in the last three meetings of 2023 in September, November, and December. The 5.25% rate is the highest in fifteen years and has so far been effective in lowering the inflation rate. However, there are some experts that are warning another rate hike might occur. Certainly, lenders might feel the lending risk has increased should the economy tighten in any way and remove their lowest interest rate offers. 

The possibility of finding the best remortgage rate of the year could be enough to motivate homeowners to take action and get a new deal now, but there are other reasons to start the process to grab a remortgage now.

There are some homeowners seeking to remortgage before house prices decline. Most economists and housing market experts believe the housing market is going to have a decline in demand. The average house price, some argue, is in need of a correction to a lower level after the many record-breaking increases experienced during the pandemic buying boom. Therefore, it could be seen as a good thing for the housing market as it would bring affordability levels down and allow more first-time buyers to reenter the market. 

For homeowners, the mention of declining house prices should cause concern. With declining house prices could come declining property values. The value of a property is an important criterion for a lender in considering the offering of a remortgage to a homeowner. Just as the loan to value or LTV mattered when the initial mortgage was obtained on a property, so it will matter when subsequent loans are sought. 

The LTV is important to the lender, and for newer homeowners or those that have cashed out their equity in the last few years, the distance between having built up equity and slipping into negative equity is remarkably close. If the property value slips below the debt level, then the property is considered in negative equity, and it puts a remortgage out of reach.

There are many reasons why a homeowner might be closed out of being able to get a remortgage, and it could put them in a difficult situation should they be at the end of their mortgage deal and not have the option of remortgage offers. Without a remortgage, the lender will transition their loan to their standard variable rate (SVR) which is generally higher than the rates available with a remortgage.

A SVR could be double or more the rate of a remortgage and the increased cost could cause affordability issues for homeowners. In fact, this very scenario is a concern of many experts warning of what another rate hike could cause as homeowners become prisoners to their mortgage and find it difficult to pay their monthly repayments.

Because of the current lower interest rate offers, and because there might be another rate hike which could occur in February at the first MPC meeting in 2024, and because lenders might pull their lower rates as demand grows and competition for borrowers declines, and because some homeowners might be trying to avoid a future decline into negative equity with falling house prices, homeowners are shopping for remortgages in higher numbers.

Remortgage completions increased by 49% in December according to data from LMS. There were fewer remortgage cancellations with a decrease to 7.61%. 

The reason for remortgaging could be as unique to a homeowner as their property itself. However, for most it is to take advantage of savings, and to gain security and peace of mind. While the rates might not be historically low as they were only a few years ago, there are certainly smart reasons to shop for a remortgage now and the data would confirm the opportunity to get a new deal is something not to be missed.