Remortgaging has been enjoying a surge in popularity in recent months, thanks in no small part to mortgage rates being at record lows. However, given the signs of rate rises to come, it's becoming even more pressing to take the plunge – and considering how much you could save, it's a no-brainer! Unfortunately, research from TSB shows that many homeowners fail to realise the savings they could make by remortgaging, which could mean too few make the switch.
The figures show that 31% of eligible homeowners hope to cash in on low interest rates this year, with 25% planning to remortgage this month, yet the potential savings are being vastly underestimated: the average saving respondents expected to make from remortgaging their property was estimated at £49 a month, compared with an actual average saving of £96 per month (or £2,300 across the life of a two-year fixed term on a £100,000 mortgage).
The research clearly highlights the untapped potential of remortgaging – just think of the difference it could make to your monthly finances! TSB found that, by remortgaging at a lower fixed rate, homeowners have been able to free up extra cash for a whole range of other uses: 39% would use the extra money to go on holiday (and 24% of those said they'd go on three or four holidays in the year), while 37% planned to use the extra money to overpay their mortgage, helping them become mortgage-free faster.
A further 30% plan to carry out DIY jobs, while 21% would go even further, using the cash for a major home renovation like a loft conversion or extension, and 16% would spend the money on doing up their garden. A big ticket item (such as a fridge or new TV) was on the cards for 11% of respondents, while 9% would treat themselves to a new car, just showing how much people could benefit from a remortgaging cash injection.
The bank revealed that it saw a 27.5% increase in remortgage applications in 2016 compared with 2015, and there's no sign of things slowing down! It's clearly a great time to cash in on low mortgage rates, and given that you could save even more than you perhaps expected, what's stopping you?
Our own figures highlight the additional benefits of remortgaging, and the potential cost involved should you choose to revert to your lender's standard variable rate (SVR) instead. Let's say you were coming to the end of a two-year fixed rate mortgage deal. Two years ago you'd have been charged an average rate of 3.19%, yet if you now reverted to a current average SVR of 4.56%, you'd be hit with a rate increase of 1.37%. Alternatively, if you remortgage to the current average rate for a two-year mortgage (2.31%), you'd see a rate cut of 0.88%. Remortgaging clearly comes out on top!
"Mortgage payments are often the biggest outgoing for many households. By remortgaging, homeowners stand to save up to £96 per month on average, which can make a huge difference to family finances," commented Ian Ramsden, director of Mortgages at TSB. "It could mean being able to afford a family holiday, carry out much needed home renovations, or simply help ease the pressures on household finances each month.
"Remortgaging might not be right for everyone, but it's important to understand your options. It doesn't have to be complicated or time consuming to remortgage, so it's well worth investigating if people are looking for ways to make their finances go further in 2017."
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