The happy new ownership phase for homeowners is coming to an end. Unfortunately, many are unaware of what is waiting for them. Thousands of homeowners are coming to the end of their mortgage term and will be facing interest rates much higher than what they were used to paying. It could mean hundreds of pounds more per month and to keep from paying more than necessary, they should be learning all they can about remortgaging.

At the end of a mortgage term, a homeowner has the choice to either remortgage or to allow their loan to be moved onto their lender’s standard variable rate (SVR). A SVR is usually higher than what could be found with a remortgage. Not only could a remortgage save money by escaping a SVR, but with a fixed rate remortgage deal the homeowner could shield their budget from rising interest rates.

The Bank of England’s Monetary Policy Committee (MPC) has increased the standard base interest rate during each of the last eleven consecutive meetings. In December 2021, the rate went from almost zero at 0.1% to 0.25%. Ten meetings later and in March 2023 the rate became 4.25%. The next meeting of the MPC will be in May and could result in yet another rate hike.

Inflation was last reported above 10% and the Bank of England’s target rate is 2.0%. Therefore, it is a possibility that more rate hikes will be needed to get inflation closer to target.

Facing higher interest rates has been a struggle for homeowners already having dealt for many months with inflation, higher energy costs, and food costs. Many are possibly still in recovery mode from the pandemic. Finding savings is important. 

While lenders will not be offering historically low interest rates as was the case just over a year ago, there are savings to be found.

Choosing a remortgage over a SVR or even moving to a new deal from a variable rate could offer savings, especially with a fixed rate. Discovering what remortgages are available is easy by shopping online. In a matter of minutes, a homeowner could have a quote in hand after visiting a website of remortgage lender. Visiting the website of a remortgage broker could put many quotes from a variety of lenders in hand to review and compare. 

It should be noted that despite the recent increase in the base rate, many lenders have restrained from bumping up their fixed rate deals. This is likely a competitive move to grab the attention of homeowners as lending has lost demand due to higher borrowing costs. The competitive environment could end at any time. Therefore, perhaps shopping for a remortgage should be done sooner rather than later.

There have been reports that some experts believe that rates might drop after inflation comes under control. That could be, but it is unlikely that the historical low interest rates found during the pandemic would occur again. It isn’t the markings of a healthy economy for rates to be almost zero or near zero. 

Rather than pay out more while waiting for rates to decline, it is likely a smarter strategy to save now. 

Homeowners should also be aware of the state of the UK housing market. The same homeowners that obtained historically low lender offers will have had little time to build equity by paying down their mortgage debt. Experts have warned that some homeowners are in danger of going into negative equity and will then be out of reach of a remortgage. 

Economists have warned of a declining housing market. This could cause property values to decline and if a homeowner’s property value falls below their mortgage debt they will be in negative equity and as mentioned a remortgage would then be out of reach.

When interest rates were falling, borrowing was becoming cheaper. At one point it became historically cheap, but as the rates have been increasing so has the cost of borrowing. Affordability is a danger facing many homeowners, so it is important to prepare and take action to protect their household budget and save where possible.

While realizing the cheap interest rates of before are gone, it doesn’t mean there aren’t savings to be found. Avoiding a SVR with a remortgage could save money, and perhaps a substantial amount of money. Choosing a fixed rate remortgage could offer savings from having to face any further rate hikes. 

The reality of interest rates is that they are not likely to return to the historic levels lenders offered not long ago, and that the current base rate is not likely to stay steady but face further hikes to control the growth of inflation. Rather than miss out on current savings available by waiting for things to return like they were, it’s quick and easy to discover how much financial relief could be found with a remortgage and make the most of current opportunities to save.