Is now the right time to remortgage my house?
Hundreds of mortgage products were taken off the market by lenders as mortgage rates surged in the wake of the mini-budget that was announced in September.
The average interest rate has now jumped to a 14-year high as borrowers can expect to pay over 6% for a mortgage fixed for two years.
This compares with the average cost of a two-year fixed rate in December 2021 of 2.34%; while a mortgage fixed for five years cost on average 2.64%.
Understandably, many people may be wondering whether now is the right time to remortgage their property.
It is said that the Bank of England’s current base rate (10%) was the largest rise in the base rate since 1989. So, agreeing to a mortgage deal now with your lender could well be the most prudent course of action for borrowers.
Why are interest rates fluctuating?
Interest rates are fluctuating for a number of reasons including the high rate of inflation, the war in Ukraine, and the cost of living crisis which has led to rising costs of gas, oil, and electricity.
This has been caused as a result of the pandemic since the government had to borrow a large amount to support UK businesses during lockdowns and through the furlough scheme. As such, the current economic situation is volatile.
Ultimately, the markets are still responding to the new Sunak government, and its economic policies will determine the extent to which the Bank of England will need to increase interest rates. But inflation currently standing at 10.1% will more than likely raise mortgage rates.
When is the best time to remortgage your house?
Generally speaking, the best time to remortgage your property is when you are looking for a new deal after your current fixed-term mortgage has expired. Similarly, you can do so if you want to refinance your home or release equity.
With inflation currently at this high level and mortgage rates likely to rise, it might be a good idea to lock into a fixed-rate deal now in case rates do go up even higher than they already have. The alternative is to remain on a variable mortgage rate which can be risky in times when the interest rates are so uncertain.
It is not a good idea though to switch your mortgage deal in order to save on your monthly repayments until you reach the end of the fixed term period, as you could end up paying early repayment fees for ending the contract prematurely.
The advantage of having a fixed-term mortgage is that you are provided with the certainty of knowing how much you are paying each month so you are able to budget better and plan your monthly outgoings.
Therefore, if you are looking to pay a regular monthly amount to regulate your outgoings, then remortgaging your home and getting a fixed-rate mortgage will help this.
Will mortgage rates go up in 2023 in the UK?
Analysts are suggesting that interest rates will go up, although there is always uncertainty over the long-term trend for mortgage rates.
This means that people will have to consider how much they can borrow and over what sort of time period. Mortgage lenders look at the likely long-term costs of borrowing and try to stay one step ahead of the Bank of England when setting rates for fixed-rate deals.
Unfortunately, for mortgage holders, the worrying thing is that the current 0.75% rise is unlikely to be the last base rate rise. Many analysts are predicting that we can expect further rises in the new year when base rate hikes could reach 4.75% in January 2023.
How can GloverPriest help?
If you are looking to remortgage your property and need help with conveyancing, we are here to help. GloverPriest is accredited by the Law Society's Conveyancing Quality Scheme (CQS) which means that we provide expert and reliable conveyancing services.
If you need to instruct a conveyancing solicitor, please do not hesitate to contact us today to see how we can help you. Complete our enquiry form.