By the middle of next year, hundreds of thousands of young homeowners could be in financial trouble with their repayments according to the Financial Conduct Authority (FCA). Younger homeowners to age 34 are more likely to have difficulty due to higher interest rates. Yet, the FCA is not the only experts calling for homeowners to prepare for more financial strains before relief comes from a more stable economy. There have been many calling for homeowners to get familiar with their current mortgage and consider a remortgage to offer savings rather than pay more than necessary.

The FCA noted that those putting more than 30% of their gross household income towards repayments to be alert as they are the most likely to get into financial difficulties. This is especially true for those that will be coming to the end of their mortgage term that was secured when the Bank of England’s standard base interest rate was at an historic low of almost zero at 0.1%.

The rate began to be increased by the Bank’s Monetary Policy Committee (MPC) in December 2021 in response to growing inflation. There have been ten consecutive MPC meetings that have resulted in a rate hike and it now is at a high not seen in over a decade at 4.0%. The next meeting is this month and could see the rate increase again. While inflation has possibly reached its peak, there is more work to be done by the MPC to bring it from double digits back to the Bank’s target rate of 2.0%.

If the homeowner obtained a fixed rate mortgage back when rates were historically low, at the end of their term they will be without the protection of a fixed rate and without their lower repayments. Choosing a remortgage could allow them to again obtain a fixed rate, but without the opportunity to find historically low interest rates. However, it is a better alternative to not remortgaging and allowing their lender to move them to the lender’s standard variable rate (SVR).

A SVR usually is at a higher interest rate than found with a remortgage. While an average fixed rate remortgage could be near 5%, a SVR average is likely over 7%. Therefore, it is obvious why experts are suggesting a remortgage could be helpful.

It is, for some, the best strategy and so much so that homeowners have chosen to take on a penalty to end their mortgage term early. This allows remortgaging early at current rates rather than face higher rates by waiting out their term. It is not a choice for all homeowners, but certainly a consideration.

It is easy to shop for a remortgage online. Visiting remortgage lender websites could put quotes in hand quickly. Visiting a remortgage broker could put many quotes from a variety of lenders in hand to review and compare. Brokers could also have exclusive deals available not found directly from a lender to a borrower.

The next MPC meeting is the 23rd of March. It is also a MPC meeting that will involve an inflation report. Depending on the report, the MPC could hold steady, offer a slight increase, or follow as they have been and put the rate up by another 0.25%. It should be noted that there is not a meeting in April and therefore the choice of the MPC must be helpful to the economy until the next meeting in May.

Luckily, for those homeowners seeking a better rate, borrowing due to higher rates has slowed and it has put lenders in a more competitive position. Fixed rates have declined slightly and there are attractive deals to be found. It could be the best time to get a remortgage, and at the very least anytime now is the best time to shop for a remortgage. The information discovered could put homeowners, younger or long established, in a position to save money rather than pay more.