Since the latter part of 2021, interest rates in the UK were seeing a steady climb, and this hike was forecasted to climb even higher, with some predicting a rise of up to 6.5%. However in a surprising turn of events, the Bank of England decided to keep the policy interest rates stabilised at 5.25%. This is mainly attributed to the drop in inflation levels experienced during the month of August this year.
What It Means for Current Mortgage Holders
For borrowers with an existing variable rate mortgage, this will come as good news to know that mortgage payments will not be rising any higher, at least in the near future. The post pandemic economic turmoil resulted in steadily increasing interest rates, 14 revisions to be exact since November 2021.
Borrowers on fixed rate mortgages may not be affected right now, but it is estimated that a total of 800,000 mortgages in the UK are set to expire in the second half of 2023 and another 1.6 Million in 2024. At the end of this term these mortgages will be transferred to the lender's standard variable rate (SVR) which currently is averaged at 8.18%.
For those hoping to move to fixed rate mortgages, the current lowest rate, according to Moneyfacts, is 5.28% from Barclays for a two year term and 4.90% for a five year term from Virgin Money (correct as of 01 December 2023).
The current remortgage fixed rate is at 2.34% for a two year fixed rate. The possibility for increased remortgage rates is predicted. The rise in interest rates could pose a loss of disposable income for those expecting to remortgage.
To prepare for any unexpected interest rise, experts advise those who are remortgaging to consult with mortgage advisors and seek available options for a better deal in the six months prior to deciding on a remortgage. Although these fixed rates are comparatively higher than what was available a year ago, lenders may be inclined to lower rates with the change in the policy.
Is Now a Good Time to Remortgage?
Considering the favourable turn in interest rates it is natural to wonder if now is the right time to remortgage. Some economists believe that the interest rates have reached their peak and may even fall lower, however the Bank of England does not mention any possibility of lowering rates and predicts that the rate will stabilise and plateau instead.
It can be tempting to want to stay in your lender's standard variable rate until the interest rate is lowered to remortgage, but this could be a risk that could either workout or not.
On the other hand, if rates have fallen lower and there is a better deal, you could consider dropping out of this tentative deal and lock in the better one.
Interest rates may be making a slow turn towards decreasing but any decisions made now could be premature. Like any transaction, there is a risk involved when choosing to take advantage of the interest hold. If you’re considering changing your mortgage, it is best to get help from a professional mortgage advisor. In the meantime those moving to remortgage their properties should try to improve their chances of getting a good deal.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
* Approved by The Openwork Partnership on 12/12/2023