Best Mortgage Rates For Remortgaging – Home Ownership > Mortgages > Remortgaging in 2022: Is Now the Right Time to Renovate and for How Long?
This remortgage guide is in two parts. First, the short answer that will quickly help you decide how long to service your mortgage and the best fixed rate mortgage. The long answer will explain in detail:
Best Mortgage Rates For Remortgaging
According to the Bank of England (BOE), the annual rate of inflation will rise to around 10.9% by the end of 2022, mainly due to rising energy and food prices. When inflation is above the BOE’s target rate of 2%, it will try to raise interest rates to try to bring inflation under control. The Bank of England has been raising interest rates since December 2021, with the most recent increase in November 2022 when the base rate rises to 3% from 2.25%, its highest level since 2008. Yet inflation is still rising, interest rates are rising and rates are likely to rise.
Remortgage Process Explained
This has a serious impact on the mortgage market, which will inevitably lead to further price increases in the future. That means higher mortgage rates. The market is currently pricing in a further interest rate rise of around 2% over the next year (bringing the BOE base rate to 4.8%), thus monthly repayments on a typical 25-year mortgage (which is not a fixed rate) plus £100 per £100,000 borrowed. This means that on a £200,000 tracker or adjustable rate mortgage your monthly repayments could increase by £200 per month if you don’t adjust early. The message is that, if you can afford a mortgage, it pays to act early to secure the best fixed-rate deal, if you want to prevent your mortgage repayments from rising in the future, as the best deals are pulled. Borrowers at an increasing rate. I explain how to do this in the section titled “Get a Free Mortgage Review Now.”
If you have a fixed rate mortgage, interest rate changes won’t change your mortgage payments. During the initial introductory period, you’re guaranteed to pay the same amount every month, meaning you won’t benefit from a rate cut but you won’t be hit if interest rates start to rise again.
With a fixed rate mortgage it is a good idea to check when the contract ends and whether there is a prepayment charge if you terminate the contract before the fixed term ends. If you can get a new mortgage at a lower rate than what you’re currently paying, you can save money by switching, especially if there are little or no prepayment costs.
More importantly, if your fixed-rate contract ends in the next six months, a new mortgage contract can be arranged that will start when your existing fixed-rate contract ends. That way, you can lock in an affordable rate right away before mortgage rates rise in the coming months and avoid paying prepayment fees at the same time.
Glasgow Mortgage Advice From Access Mortgages
For more information on fixed rate mortgages, see our article “What is a Fixed Rate Mortgage? Everything You Need to Know”.
Because tracker mortgages typically move up and down in line with the BOE base rate, borrowers with this type of deal may have benefited from interest rate cuts in 2020. Do you think this will happen in future interest rates? If you think rates will remain at their current level for an extended period of time, it makes sense to stick with your current arrangement. However, if you expect rates to keep rising soon – which the evidence strongly suggests – it’s worth fixing now while you can still get a competitive fixed-rate deal.
Our article “What is a tracker mortgage and is it right for you?” Tracker Mortgage has more details.
Whatever your deal, one thing is certain about interest rates: They have risen in recent months and will continue to do so. In fact, the Bank of England has raised interest rates 8 times since December 2021 and the base rate now sits at 3%. With high inflation proving problematic, investment markets expect the Bank of England to raise its base rate to around 4.8% by July 2023, as shown in the chart below (click to enlarge). This would mean that typical monthly repayments on a 25-year mortgage which is not fixed would increase by a further £100 per month for every £100,000 borrowed.
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Historically the base rate has been around 5%. For the latest insight into when interest rates may rise or fall, read the latest interest rate forecast. The article is constantly updated and provides information on when the market expects interest rates to rise and by how much they will rise.
Whatever type of mortgage you have, now is a great time to fix your mortgage (or arrange to start a new one when the existing contract ends) before the next base rate increase comes into effect. Don’t make the mistake of waiting for the Bank of England to raise interest rates again before making a decision because, by then, the best remaining fixed rate mortgages will be gone.
The easiest and most hassle-free way to make the decision, which I would recommend, is to seek the help of a mortgage advisor. If you don’t know a mortgage advisor you trust, there are two ways to find a trusted advisor:
You can review your mortgage online for free with Habito*, one of the UK’s first online mortgage brokers. I personally visited the Habito* office to ask about their proposal and recommendation process and was impressed. Habito will screen over 20,000 mortgages from over 90 mortgage lenders for you before making a recommendation. That recommendation could also be that your existing lender offers the best deal and you should stay where you are.
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The entire process can be done online (without the need for a face-to-face meeting). Habito has a 5-star rating on Trustpilot from over 5,000 customer reviews that have helped save hundreds of pounds a month. It only takes 10-15 minutes to register online and Habito can give you instant and free mortgage advice.
Alternatively, you can request a free* mortgage review from an FCA regulated mortgage professional. This is a more traditional (offline) route, but we regularly review the customer experience to ensure it is of the best quality, there is no obligation on their part and the savings are real. Typically free mortgage checks save people around £80 per month on a £100,000 mortgage. to begin with
At the heart of the “should you fix your mortgage” question is the concern that interest rates will continue to rise. Calling for fixed mortgage rates brings certainty to monthly mortgage repayments. The interest rate on a fixed rate mortgage is fixed for a specific period of time and will remain at this rate regardless of changes in market interest rates. Once the fixed period expires, the rate will normally be converted to the borrower’s Standard Floating Rate (SVR) or another fixed rate if available. Lenders often charge a fee – a prepayment charge – if the borrower wants to terminate or switch to another contract within the stipulated term.
People who are currently paying their lender’s SVR are vulnerable to interest rate hikes. If interest rates rise, so will monthly mortgage payments. Similarly, tracker and adjustable rate mortgages have interest rates that refer to the Bank of England base rate, currently 3%. However, tracker mortgages will move in lockstep with the base rate, while borrowers can often move their standard variable rates without a defined link to the base rate.
Mortgage Competition Hots Up And Rates Fall To Under 1%. For Some
So, if you are in a lender’s default SVR, which is currently around 70% of mortgage borrowers, check the terms and conditions. Some lenders have SVRs that will always be at most, say, 2% above the BOE base rate.
As interest rates rise, demand for fixed rate deals increases as buyers and mortgagees seek to secure competitive rates. The problem is that the availability of mortgage lenders will be limited on each loan agreement. When they reach their goal, they will no longer accept new borrowers. This has a knock-on effect on other lenders and will increase rates on even the cheapest fixed rate mortgages. So when lenders introduce new and improved rates as consumers inevitably scramble to fix their mortgages, all the best deals quickly disappear. In September 2022, more than 40% of mortgage deals were taken out by lenders, many within 24 hours of launch. So if you’re looking to fix your mortgage rates before future rate hikes, it’s wise to take action.
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