On average over 100,000 people a month are coming to the end of their current mortgage deal, facing the prospect of remortgaging amidst the backdrop of market uncertainty and interest rates levels not seen since the financial crash of 2008.
With 2022 already witnessing petrol prices and energy bills spiral out of control along with ever rising mortgage rates, is now the right time to consider a remortgage?
What does remortgage mean?
A remortgage is where you still live in your current home but apply for a new mortgage with either your existing lender or move to a different one, if they’re offering better terms. You can choose to remortgage just the remaining balance or increase your borrowing using equity in your property, if its value has increased sufficiently.
Remortgaging becomes an option, usually, when you approach the end of a particular interest rate offer period, whether that’s a fixed-rate offer or variable rate, giving you an opportunity to find a new deal rather than remain on your existing lender’s standard variable rate (SVR).
Should you remortgage now or wait?
Typically, the aim of a remortgage is to try to save money on your repayments by finding a better – cheaper – interest rate deal than the one you had before. The difficulty with anyone looking to remortgage right now is the outlook for interest rates has completely changed.
At the time of writing (October 2022) a series of hikes in the Bank Of England base rate has seen the average two year fixed rate deal rise to 6.11% and 6.02% for five years – the highest level for twelve years. By comparison just twelve months ago the equivalent deals were 2.25% for two years and 2.55% for five years.
All of this means anyone whose current deal is about to expire may have to accept that, regardless of what new deal they may now qualify for, their repayments are going to go up not down.
However, whilst this increase places more pressure on monthly outgoings, remember the aim of remortgaging is to try to save money from the point you’re at right now by minimising the impact on potential future rises in interest rates over the coming months or years. Whatever rates were in the past – even just a few months ago – is irrelevant.
With further interest rate rises expected both before the end of 2022 and into 2023 (some analysts predict the BofE base rate could reach 5.5% before it comes back down), locking in to a new fixed-rate deal now so you know exactly how much your repayments are going to be – and what you can budget for – could be the shrewder option rather than adopting a ‘wait and see’ strategy.
How long does a remortgage take?
Anywhere between 4-8 weeks is a solid timescale to work towards for a remortgage. Sticking with your existing lender should, in theory, make things much quicker and more straightforward. In reality, this would be a product transfer rather than a remortgage and also negates the need for a solicitor as usually no legal work would be involved.
However, now perhaps more than ever, the opportunity to consider moving your mortgage to a lender offering better terms shouldn’t be dismissed purely on the basis of speed to completion.
If the aim is to save money then the only way to achieve that is by conducting a thorough comparison of all the current remortgage deals available on the market and the quickest, smartest way to do that is by enlisting the help of an experienced remortgage broker.
Not only will a broker be able to identify the best remortgage offers available right now, they’ll also be able to assist with the application process required for switching lenders – ensuring this is completed as swiftly as possible.
How long does it take to refinance and release equity?
If you’re looking to release some equity from your property then the timescales mentioned above should still stand, albeit expect this to be more towards the latter end and around 8 weeks being more realistic.
This is also where a solicitor will definitely be required in order to complete your remortgage, as a valuation and new mortgage offer will be needed. Your solicitor will deal with all the legalities surrounding the equity release and signing of the new mortgage deed.
On a positive note, with the rise in property prices in recent years, if the value of your home has risen significantly since you took out the original mortgage, the loan to value of your borrowing will have fallen. This can make you eligible for much more competitive interest rates as more lenders vye for your business.
If you want a quick snapshot of how this could all look for you in terms of repayments when you remortgage, you can use our calculator below – simply input the details for your property and current mortgage and the calculator will do the rest.
Your broker will be able to provide a more accurate picture, using the best current offers available in the market.
Our remortgage calculator can tell you what your new loan-to-value (LTV) ratio and repayments will be after you've remortgaged, with or without releasing equity from your property.
After you have remortgaged your new LTV ratio will be and your new mortgage payments will be as indicated below…
New Monthly Repayments:
Get started with an expert broker to find out how much they can help you save on your remortgage.
Is it worth paying exit fees?
If your current deal ends within 6 months, the good news is that most lenders allow you to reserve a new fixed rate deal now, which you’ll automatically switch onto when your current deal ends, without paying an exit fee. Again, this might be a higher rate than you’re currently on, but it’s still likely to be lower than the standard variable rates and even fixed rates available for the foreseeable future. If you’re further than 6 months away from the end of your deal, then in most cases, you would incur an exit fee to leave your current deal.
This is really the point where it becomes a more difficult decision, as you’ll need to weigh up whether the exit fees are worth paying in order to get a rate that’s unlikely to be available later. If interest rates continue to rise at the current rate, then an exit fee may be a very valid expense, however, an experienced broker would help you to complete these calculations more accurately.
If you get in touch we can introduce you to a broker we work with. They’ll be able to look at all of the options available for your circumstances and determine whether or not you would be able to save money by remortgaging now as opposed to waiting.
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