Over recent years, the number of people remortgaging their homes in the UK has fallen. Recent data published in Mortgage Introducer showed that gross remortgage lending in December 2012 was just £2.7 billion. This is 24.7 per cent lower than the same time in 2011 and the lowest monthly value since the end of 1999.
It’s clear that fewer mortgage products, falling house prices and more uncertain employment have resulted in many people sticking with their current lender rather than switching to a new deal. However, now is actually an excellent time to remortgage. Keep reading to find out why.
The Bank of England Base rate has been at its record low of 0.5 per cent since March 2009. And, with the economy still struggling, many experts believe that the Base rate won’t rise until 2017 at the earliest. With no upward pressure on interest rates, ‘swap’ rates – the rates at which financial institutions lend to each other – are very low. This has resulted in cheaper mortgage deals.
In addition, in August 2012 the UK government introduced its ‘Funding for Lending’ scheme in an attempt to stimulate the mortgage market. This scheme allows banks and building societies to take advantage of cheap funds in return for increasing the amount they lend to homeowners and small businesses.
This scheme has resulted in many lenders being able to reduce the cost of their mortgage deals. Over recent months we have seen five year fixed rates fall to under 3 per cent – their lowest level ever. Two year fixed rates can be found at under 2 per cent.
With interest rates at some of the lowest levels ever seen, now could be the perfect time to step in and take advantage of an unprecedentedly low mortgage rate.
In 2012, over a million borrowers saw their mortgage payments rise despite no change to the Bank of England Base rate. A number of major lenders including Santander, Halifax, the Co-Operative Bank and Bank of Ireland raised their ‘standard variable rate’ (SVR), leaving over a million mortgage customers facing increased repayments.
Over recent years, your mortgage may have reverted to your lender’s SVR after a discounted or fixed rate deal expired. While many people are benefiting from low rates – lenders including C&G and Nationwide have SVRs that are tied to the Base rate – others have seen their payments rise. Lenders have complete control over their SVR and can raise and lower it as and when they see fit.
Other lenders are sure to increase their SVRs over the next few months and years. So, with rates rising, are you now paying too much on your mortgage? Could your lender be the next to increase their SVR? There may be better value deals available elsewhere and so it could be time for you to remortgage.
Take advantage of a low fixed rate
Figures from the Financial Services Authority found that fixed rate mortgages accounted for 62.5 per cent of all loans between April 2011 and March 2012. Fixed rates give you peace of mind that your mortgage payments are guaranteed for a period of time. They also ensure that your monthly payment won’t rise even if the Base rate was to increase or your lender was to raise their standard variable rate.
There is strong competition in the remortgage market and lenders are offering better and better deals to attract new business. If you have a reasonable amount of equity in your home then you could not only reduce your repayments through a remortgage but also benefit from a low fixed rate for several years.