Dangers Of Choosing Lowest Remortgage Rates | moneyfacts.co.uk

Moneyfacts.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfacts.co.uk will always be from news@moneyfacts-news.co.uk. Be Scamsmart.

ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Derin Clark

Derin Clark

Online Reporter
Published: 13/10/2021
smiling family sitting under roof made from card

Homeowners looking to remortgage can get rates from as low as 0.51%, however borrowers should be aware that the lowest rates are variable, which means they could rise if the Bank of England increases base rate.

Variable rates, which include discounted variable and standard variable rate (SVR), are usually directly impacted by base rate rises, and even a small increase in base rate can see these rates increase. With base rate currently at a record low of 0.1% it may be no surprise that the lowest remortgage rates in our charts are variable rates, with Progressive Building Society offering the two lowest remortgage deals of 0.51% variable for those with 40% equity in their home and 0.79% variable for those with 25% equity. Both deals are discounted variable for two years and only available to those in Northern Ireland. The next lowest rate comes from Cumberland Building Society, which offers 0.83% discounted variable for two years to those with 40% equity in their home.

As these rates are lower than the lowest fixed rate deal, which stands at 0.84%, they may be tempting for eligible homeowners, but borrowers should be aware that if base rate rises the rates on these deals will likely be increased.

Many finance experts believe there is a high likelihood of the Bank of England increasing base rate to help control rising inflation. Originally it was suggested that the base rate rise would take place next summer, however some experts are now suggesting it could be as early as this December, with the possibility of base rate rising to 0.25% by the end of this year followed by a further increase to 0.5% by March 2022.

Alternative remortgage option

With the possibility of a base rate rise, homeowners looking to remortgage may want to consider locking into a fixed rate deal instead. Unlike variable rates, which can increase or decrease at any time, once a borrower is locked into a fixed deal the rate will remain the same for the term of the deal. This means that a homeowner who chooses the current lowest two year fixed deal of 0.84% will have this rate until the two year term has ended, at which time they will normally revert to the lender’s SVR. Alternatively, homeowners may want to consider a five year fixed remortgage deal. Although the lowest rate in this chart is higher, standing at 0.91%, borrowers locked into this deal will be guaranteed this rate for the five year term of the deal. This would mean that no matter how high base rate rises during the five year period, the mortgage rate for those in this deal will not change.

The continued economic uncertainty, along with concerns about rising inflation, means that homeowners coming to the end of a fixed rate deal or who are on a variable rate, may want to consider remortgaging onto a new fixed rate deal to provide some certainty over the coming years.

How to choose the best remortgage deal

Homeowners looking for a new mortgage deal should keep in mind that the lowest rate may not be the best, or most cost-effective deal. Instead, borrowers should consider the total cost of the mortgage, including product fees and incentives, which can impact upfront costs and monthly repayments. If you are unsure about which deal is best for your personal circumstances it may be worthwhile speaking to a mortgage broker to discuss your options.

Mortgage Repayment Calculator

Your Result

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. 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.

smiling family sitting under roof made from card


Moneyfacts.co.uk will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy