It seems there are always decisions to be made as a homeowner. Those decisions can range from the simple to the complex, but perhaps none can keep one up at night more than a decision that involves money, especially when the wrong decision could cost the homeowner money, and the right one could save them money. This sort of decision is exactly at play currently for many homeowners considering whether to remortgage now or later.

There are many homeowners coming to the end of their mortgage term this year. Depending on how long ago their mortgage was completed and what type of loan they chose, they have a big decision to make.

If they obtained their loan when rates were higher than they are right now and they have been paying on a fixed rate deal, then remortgaging is an easier decision. When a homeowner can move from a higher fixed rate to a lower rate they are choosing a cheaper borrowing cost. Definitely, in that case, the choice to remortgage now is one to be easily made.

However, in the case of many homeowners that obtained their current fixed mortgage when rates were lower than what is available now, they might be trying to navigate through many scenarios and hope they choose the right one. 

For instance, if the homeowner obtained a two-year fixed rate in 2022, the rate they chose could be lower than the ones available now. At the end of their term, they can remortgage, or they can allow their lender to transition them to their standard variable rate (SVR). A SVR is normally a higher interest rate than what could be found with a remortgage, therefore the homeowner would be paying more. 

Some homeowners allow their property debt to be moved to a SVR because they are unaware of how a remortgage could save them money or the benefits of one. There are many myths surrounding remortgaging simply because it can be mistaken as to what it can do or what it is due to there being so many different kinds of remortgages and the unique needs that fit the choice of each one. Not all remortgages are the same for they are as unique as the situations homeowners find themselves.

The reason a homeowner might ponder the decision to accept a SVR now is because they believe that interest rates will be lower soon. By waiting out for lower rates, of which they are likely going to choose a fixed rate remortgage, they believe they will have made the right choice to save money. 

Going back to the homeowners coming to the end of a mortgage term that involved a lower interest rate than available now, this is exactly the type of situation they might be having to consider. If they are going to have to pay more, they certainly don’t want to pay more than necessary. They are likely used to their current repayment and perhaps the higher interest rate will strain their household budget. Saving money is usually the goal, no matter how much of a strain higher repayments will be or not.

So, should a homeowner risk moving onto a SVR in the hopes of saving money later on with a remortgage when rates drop further? It is going to depend specifically on the homeowner’s situation which involves considering their loan to value (LTV) ratio, how much they still owe on their mortgage debt, when their term is due to end, the type of loan they currently have and of course the interest rate. 

Consulting an expert is always a good decision, but in simple terms these are the considerations in choosing to either remortgage now or wait for lower rates and be moved onto the lender’s SVR.

It is true that lenders are a bit competitive currently and are lowering their offers despite the Bank of England’s Monetary Policy Committee (MPC) having only this month voted to lower the standard base interest rate for the first time since March 2020. The reason for the cut to the base rate of 5.25% by 0.25% to 5.0% is because inflation appears to be responding to the higher base rate that has existed since August of last year. 

However, experts remarked that inflation would not sit at the target rate of 2.0%, but slightly increase and remain so until the end of the year. Next year there is a possibility of inflation declining to target once more and below. This would be the ideal time for a cut to the base rate. There are fewer experts offering forecasts of a sooner rather than later base cut.

Having to consider the MPC decisions is always difficult for there are many economic factors that the committee must consider than just how inflation is doing today. The easier part for homeowners is to look past the MPC and consider what lenders are choosing to do with their own offers. Optimism and competitive energy are the modes of the current lending market.

As mentioned, the current base rate is 5.0%. Lenders are already offering lower rates than the base rate. Therefore, one could consider that the better rate they are waiting for is perhaps already here. As of today’s writing, the average two-year fixed remortgage is 4.79% average, with 3.59% being the best remortgage offer on the lending market.

While there are remortgage offers near and sometimes below the current base rate, the average SVR is 8.16%. Every month the homeowner is paying on a SVR that could be double or more the rate they are paying on a remortgage is a loss of savings. Choosing a SVR is very rarely a good choice, even when awaiting lower rates.

If the homeowner is set on waiting out for a better fixed rate loan offer, then perhaps they should consider a tracker rate remortgage with no early repayment charge (ERC) for ending the deal early. They can then save money by avoiding a SVR and have the option to remortgage with minimal fees and no ERC when they like the rate offers available to complete a fixed deal.

They could also choose a remortgage early before their term ends at current rates, and wait to complete the deal until their mortgage term ends allowing them to have a better choice than a SVR in place but being able to take advantage of a lower interest rate later on when their term ends if in fact the rates lower.

It is usually a smart decision to create a strategy that does not involve a SVR and waiting. There are options available that are more likely to be smarter and save money.