The pandemic has caused ripples across a number of sectors and the housing market is among the industries that have been affected. House moves were at a standstill in England until mid-May and there were calls for Wales to follow suit and open up the country’s housing market a month later.
Mortgages in particular have been impacted. This is because the Bank of England (BoE) made two emergency interest rate cuts in quick succession in March, bringing it to 0.1%, and this means mortgage borrowing rates in the UK are lower than they’ve ever been – which means now could be the ideal time to remortgage your property.
If you’re a homeowner with a fixed-rate mortgage, this cut won’t change the amount you’re paying each month. But if you’re on a variable rate, you might already be paying a reduced amount, depending on how your lender has responded to the change in the rate cut.
Whichever type of mortgage you currently have, now could be the best time for you to remortgage your property. Here’s a look at what remortgaging is, how it works, and why it could be good for you.
What is remortgaging?
Remortgaging is when a homeowner shops around for a better deal on their current mortgage setup and makes the switch to the cheaper option.
The same property is used as security and you don’t have to stay with your current lender if you’ve spotted a better deal elsewhere.
Why remortgage your property?
There are a few reasons why you might want to do this, and checking your financial situation will help you see if remortgaging is an option for you.
First, you might be looking to save money. It might be that you’re trying to plan out your monthly outgoings as a reaction to the pandemic or you might want to pay off any longstanding debts, such as car finance or credit card bills.
So, if you have a fixed-rate deal at the moment and it’s coming to an end, this is where you might want to fix again for a better price. Be sure to start looking around three months before your rate ends. This will put you in a good position to snap up the cheaper rates and prevents you from getting a shock when your lender’s standard variable rate – which is usually a lot higher than your fixed amount – kicks in.
Another reason for remortgaging could be that your home’s value has shot up since you first bought it. This can mean you’re eligible for a lower rate the next time around.
The main reason why you might be considering switching at the moment is likely to be that you’re worried the interest rates will go back up and you’ll miss out on some of the better deals. Or, if you’re currently on a variable rate, you might be concerned that the BoE will change the base rate again and you’ll have to start paying more.
Things to be aware of
If you still have a big chunk of your mortgage to pay off or you’re happy with your current deal, remortgaging might not be the best option for you. There are fees that come with remortgaging, including an arrangement fee and potentially valuation and solicitor fees – a bit like when you first bought your property.
Take the time to shop around and see what your current lender is offering before you make the move. You might find that there are better deals to take advantage of that you were unaware of, saving you money in the long run.