Is it the right time to remortgage?

The ship has sailed for low interest rates, during the covid pandemic rates dropped to an all time low and homeowners who took advantage of the low rate, long term fixed rate deals will be reaping all the rewards now seeing that rates have risen in all areas of the market. The Bank of England has already set out their strategy to curb the rise of inflation and that involves making further base rate increases. It’s no longer a matter of “if” but a question of “when” and “by how much”.

That being said, is it worth paying to get out of a fixed rate deal now to avoid the high-interest rates when your current deal ends?

Depending on the size of your current mortgage, the Early Repayment Charges (ERCs) and how you predict mortgage rates to increase could be the answer. Many market analysts and advisers predict the base rate to rise to at least 2% by the end of 2022, with some saying that rate could increase as high as 3% by easter 2023. Whilst no one has a definitive answer, it’s often best to air on the side of caution.

Today’s mortgage rates start around 3% per annum an increase depending on the loan to value, the individual’s circumstances, along with a few other factors. These rates are based on a current base rate of 1.75%. If we saw the base rate increase up to 3% then it wouldn’t be hard to imagine mortgage rates of at least 5%, possibly even higher.

A £100,000 mortgage today with an interest rate of 3.3% would have repayments of £570 per month. Compare this to a rate of 5% then the monthly repayments increase by £90 per month up to £660 per month. Over a 2-year fixed rate deal, you would make savings of £2,160 by remortgaging now.

Re-mortgaging now or later all depends on how much your early repayment charges are and how you expect the mortgage rates to change over the next year.

If you are unsure whether you should remortgage now and would like one of our advisers to help you understand the costs involved with remortgaging or if you have any questions on the current mortgage market, then contact us to speak with one of our mortgage advisers.

ABOUT THE AUTHOR

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Woody Snapper

Woody works with individuals and business' looking for corporate finance, high net worth mortgages, complex loans, bridging loans and development finance.

To contact Woody.

Tel: 07922 413586

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Email: woody@veracityfp.co.uk