According to recent gross mortgage lending figures from April 2018, the number of people deciding to remortgage has grown considerably in the last few months, in part due to many homeowners trying to secure a good mortgage rate prior to an anticipated rate rise. Gross mortgage lending was over £20.4 billion in April according to UK finance, which is a staggering 13.3% higher than the year previously. Furthermore, overall mortgage approvals are up 11% compared to last year, with remortgage approvals leading the increase, as these were over 30% higher than the year before. So what are the benefits of remortgaging, and why is it worth considering remortgaging your home right now? Secured Loans takes a look at why remortgaging has grown in popularity this past year.
The anticipated increase in the base rate
As briefly mentioned in the previous paragraph, many homeowners have decided to remortgage their home due to wanting to get the best possible deal they can prior to a base rate rise that many experts anticipated. This is despite the fact that the Bank of England’s Monetary Policy Committee stated earlier in May this year that the base rate will remain the same, which is currently 0.5%. Nevertheless, in the last couple of months many commentators in the field have stated they believe there will be at least one, or potentially two further rises by the end of the year.
Why remortgage right now?
Many mortgage rates for homeowners are at record low levels, which makes the idea of remortgaging far more appealing than ever before, especially if a base rate rise is anticipated in the not too distant future. Furthermore, managing to lock into a fixed rate mortgage deal could be particularly advantageous at this moment in time, as it will mean you will not have to worry about your mortgage repayments rising dramatically in the future if the rate does increase.
In addition, many experts recommend remortgaging if you are on your lender’s standard variable rate at this moment in time, which is thought to be the case for over a third (36%) of homeowners in the UK, according to mortgage brokers L&C Mortgages. This is because these rates are generally speaking considerably higher than other mortgage deals available on the market, and with other day-to-day expenses increasing all the time, such as energy prices, it is important to save money wherever possible.
In fact, it is estimated that the average homeowner who decided to switch from a standard variable rate mortgage to another deal could end up saving as much as £2,500 each year. It is however important to note that you may also be eligible for a second charge mortgage as an alternative to remortgaging, which could be a feasible option to consider in these circumstances.
When should I decide to remortgage my home?
There are a number of reasons you may decide to remortgage your home, but you may be unsure as to when is the best time. Generally speaking, alongside anticipated interest rates going up is a precipitating factor, it is also worth considering if:
Your current deal is ending soon
The deal you have is expected to end in the next few months: typically, the best mortgage deals available only last for a matter of time, usually between two and five years. After this period, you will most likely be put on your lenders’ standard variable rate, which is unlikely to be the very best deal on the market. This is why remortgaging can be beneficial, as you can remortgage at a cheaper rate. Whilst the process of remortgaging is fairly simple, it can take time to sort out, therefore experts recommend to start searching around 14 weeks before the contract ends, as it also gives you time to research thoroughly to see the best rates available, as well as making sure the switchover is as smooth as it possibly can be.
You want to overpay and your current lender will not let you
Another advantageous reason as to why you may decide to remortgage right now is if you are in the position where you want to pay extra on your mortgage repayments (perhaps due to inheriting money, or changing jobs with a higher salary) but your current lender will not allow you to pay extra, or only by a very small amount. This is where remortgaging can help, as it will allow you to reduce the loan size considerably, as well as potentially get a cheaper deal in the process too. However, do proceed with caution: make sure that you do not have to pay early repayment charges with your new lender, or have to pay high exit fees for your existing one. This could affect whether it is worth you to change to a new mortgage.
Your home has increased in value
Has your home increased dramatically since you took out your existing mortgage? It may be time for you to look at remortgaging. This is because you may, in fact, be eligible to a lower loan-to-value band, which means you will then be able to take advantage of far lower mortgage rates. Nevertheless, make sure that you a thoroughly researched beforehand to make sure that this is the case, and you have done your sums correctly.
You are looking to borrow more money
Many people decide to remortgage their homes in order to access extra money, perhaps to be able to do home improvements or to pay off other existing debts. With your current lender, you may not be able to access extra money at the best rates, but with remortgaging you have a higher chance of raising money cheaply and at lower rates.