The latest news on interest rates could be good or too optimistic. According to some experts, the peak rate is considered to be much lower than what was previously thought with an expected top rate of the Bank of England’s standard base rate of 5.75%. This is a positive switch from the previously expected rate of 6.50% and even with some experts forecasting higher and closer to 7.0%. The lower peak rate has come about due to inflation declining after being stubborn and barely budging with previous rate hikes. 

Inflation has declined to 7.9% after having remained in double digits for all last year and the beginning of this year. The decline did not come without months of higher interest rates and an aggressive move against inflation during June by the Bank’s Monetary Policy Committee (MPC) with a 0.50% rate hike.

The next MPC meeting is this Thursday and experts believe a rate increase will occur and the only debate is whether it will be another 0.50% like in June or 0.25% like in previous months. Whether it is one or the other is less concerning as the forecast is for more to follow and that cuts will not likely come this year or even next.

Some homeowners are having affordability issues with the rate hikes, especially those that were paying on fixed rate two-year mortgages that were obtained when there were historically low rates offered from lenders. Their terms have ended and moving from a low rate that was deemed affordable at the time to new rate choices that are almost three times or more what they were used to paying is proving to be a hardship with no relief in sight.

Homeowners coming to the end of their mortgage term this year or next will need to make the choice between remortgaging or allowing their loan to be moved to their lender’s standard variable rate (SVR). The SVR is normally higher and sometimes double or more the rate that could be found with a remortgage. Also, the variable nature of the SVR makes the homeowner face further rate hikes while a remortgage could offer the choice of a fixed rate deal. With a fixed rate remortgage, the interest rate is locked in for the term and any increases to the Bank’s standard base interest rate will not be an issue for the homeowner.

There might not be savings by discovering a lower rate with a remortgage in the current lending market, unless of course the homeowners are moving away from a SVR, but choosing a rate that is fixed and lower than a SVR will be a strategy to not pay more than necessary.

It is easy to shop for a remortgage online. Experts encourage any homeowner to shop for a new deal. It is an excellent choice for those about to end their term, those already moved to a SVR, and even for those not close to having their term expire, for some have taken on a penalty fee to end their term early versus face higher rates when theirs would have originally ended.

Shopping online at the website of a remortgage broker could put many quotes from a variety of lenders in hand to compare and review. Brokers often have exclusive deals from lenders not offered directly to borrowers. Homeowners could also go from website to website of remortgage lenders to gather quotes.

Experts warn homeowners to not wait out for rate cuts. It is not likely to happen this year or next, nor will rates reach the historic levels seen two years ago. The Bank’s rate reaching almost zero is not the sign of a thriving economy, so it is not a normal situation for borrowers to have options for rates like what was available during the pandemic and lockdowns.

There are savings to be found in guarding against loan types that usually offer higher or variable rates than what could be found with a remortgage. Choosing a fixed rate would lock in the rate and shield from further hikes that are forecasted.

It should also be noted that homeowners should put aside loyalty to their current lender. By shopping for a remortgage with new lenders, perhaps the best and lowest rate deal will be found. One should also consider any fees associated with a remortgage and weigh the costs of a deal against any savings to determine the true savings of the offer. The lowest interest rate could have the highest fees, while a deal with a slightly higher rate could offer the best savings by having lower fees. 

There is certainly much to be considered when choosing the best remortgage deal, but it is simple to consider shopping for one. It is perhaps the best and only opportunity for a homeowner to save money and keep their mortgage payments affordable while inflation is being tamed.