When is it a good idea to remortgage? | moneyfacts.co.uk

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Published: 26/02/2019

At a glance

  • Remortgaging is when you take out a new mortgage to replace an existing arrangement for example at the end of an initial fixed or discounted rate period.
  • In times of economic uncertainty, moving to a fixed rate for a set period is a good way of ensuring your monthly payments stay the same for a specified period.
  • It is important to look at the financial benefits and drawbacks of moving to a new deal – especially if there is a penalty for leaving your current deal early.

In the face of possible economic uncertainty, the current high in remortgage applications shows no signs of slowing. Many homeowners are moving quickly to lock themselves into remortgage deals while interest rates remain at historic lows. But when is it a good time to look at remortgaging?

What is remortgaging?

Remortgaging is taking out a new mortgage on your home to replace an existing mortgage. Remortgaging can be beneficial if you are currently on a lender’s standard variable rate (SVR), or a fixed or discounted variable rate deal that is about to end. This gives you the opportunity to take advantage of a new mortgage with better features, the security of fixed repayments or to take advantage of lower interest rates than you may currently be on.

Moneyfacts tip

Moneyfacts tip

A mortgage broker can help you to calculate any potential savings by remortgaging. They can also help you understand the impact of any fees on these savings too. Find out if you should use a mortgage broker.

Why remortgage now?

The Bank of England base rate has started to increase and mortgages rates are following suit.  Another good reason to remortgage is when your mortgage deal is coming to an end. At this point you will be placed onto the lender's Standard Variable Rate (SVR). This is usually significantly higher than the initial rate of the mortgage. 

Worryingly however, separate research from L&C Mortgages has found that a third of mortgage customers are currently sitting on an SVR.

When remortgaging might be a good idea

As highlighted by Moneyfacts mortgage expert, Darren Cook, the reasons behind high levels of remortgaging are that borrowers who took out a fixed rate mortgage two years ago have enjoyed historically low rates, with lenders now jostling for position in the drive to encourage borrowers to take out remortgage products, offering some of the lowest interest rates seen in a generation.  With the potential economic uncertainty foremost in people’s minds, it is anticipated that the popularity of fixed rate remortgage products looks set to continue for the foreseeable future.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

 

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Moving onto a new deal early?

This rush to remortgage is not only attracting customers who are coming to the end of their current deal, but also those whose current fixed rate term comes to an end in a year’s time or more.

As per the Moneyfacts UK Mortgage Trends Treasury Report, with borrowers potentially saving more than £3,000 a year by opting for a new fixed rate mortgage, the move away from sitting on existing SVR deals is gathering pace. Some mortgage holders are beginning to investigate the benefits of applying for low-rate offers now in order to ‘lock-in’ on favourable rates – even if this means paying a penalty now for early repayment – gambling that they will save more in the long-term by protecting themselves from unexpected hikes in mortgage lenders interest rates over the next two years.

"Borrowers may be shocked to find that their monthly repayments could increase by so much if they settle for their provider's SVR," said Darren Cook, finance expert at Moneyfacts. "This is likely to motivate many customers to remortgage. Faced with such a big jump in monthly repayments, it clearly pays for borrowers to shop around. However, remortgage customers must consider all aspects of the mortgage to ensure they are getting the best deal for them."

Pros and cons of remortgaging

  • Remortgaging often avoids paying higher rates on a lender’s SVR.
  • Added security of fixing your repayment for a set period.

 

  • Lender may want you to remortgage your whole mortgage and move to a higher rate if your current mortgage is on a lifetime tracker rate.
  • Remortgaging would incur additional fees, such as booking, legal, conveyancing and valuation fees, if changing provider.

Moneyfacts tip

Moneyfacts tip

Find out how much you could potentially save on a remortgage.  

 

Mortgage calculator

Our mortgage calculator helps you to see how much your mortgage might cost you each month.

Our how much can I borrow calculator gives you a range of how much a lender might consider lending you under a mortgage. This calculation is only an indication only.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • Remortgaging is when you take out a new mortgage to replace an existing arrangement for example at the end of an initial fixed or discounted rate period.
  • In times of economic uncertainty, moving to a fixed rate for a set period is a good way of ensuring your monthly payments stay the same for a specified period.
  • It is important to look at the financial benefits and drawbacks of moving to a new deal – especially if there is a penalty for leaving your current deal early.

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