Unlock Top Remortgage Rates: Essential Tips to Prepare

Get Ready

Those whose fixed-rate mortgages are expiring will need to secure new financing. Interest rates have fluctuated dramatically since the end of 2021. Homeowners coming off five-year fixed plans might see their monthly costs increase upon switching, while those ending two-year terms could enjoy substantial savings.

Future cuts in the Bank of England base rates are expected within the year, potentially lowering the costs of new mortgage deals, with the next rate update scheduled for February 5th.

Some homeowners may prefer to lock in another fixed rate for the stability it offers, while others might opt for a base-rate tracker mortgage in anticipation of further rate decreases. It’s important to stay informed through reliable sources about potential future rate changes, though these are inherently unpredictable, especially in current times.

If it’s been some time since your last mortgage transaction, your property value may have increased, potentially placing you in a better loan-to-value (LTV) category and qualifying you for more favorable mortgage terms. Whether you’re sticking with your current lender or switching, it’s wise to assess your property’s current market value using resources like Rightmove or Mouseprice.

Avoid Relying on the Standard Variable Rate (SVR)

Failing to secure a new mortgage deal immediately after your current one ends typically results in being moved to a lender’s standard variable rate (SVR), which can be significantly higher than your previous rate.

While it might be tempting to remain on the SVR temporarily during uncertain rate periods, mortgage advisors generally recommend against it unless under specific circumstances, such as nearing the end of your mortgage or owing a very small balance. The fees associated with arranging a new mortgage might not justify the potential savings for those with minimal remaining mortgage balances.

For example, securing a new deal with a rate of 3.65% as opposed to an SVR of 7.25% could save someone with a £250,000 mortgage over £500 monthly.

Inquire with Your Current Lender

David Hollingworth from L&C Mortgages notes that lenders typically notify you about renewal options three to four months before your current deal expires. They might offer you various products, including different fixed-term lengths or deals with or without fees.

Staying with your current lender might be appealing as it usually involves less paperwork and fewer eligibility checks compared to switching providers.

Additionally, remaining with your existing lender eliminates certain fees, such as property valuation and legal fees.

… But Compare Other Offers

With over 7,100 mortgage products available in the UK, it’s beneficial to compare what’s available beyond your current lender’s offers. Many lenders include perks like free valuations and legal services.

Tools such as Moneyfacts and MoneySavingExpert provide up-to-date comparisons of the best deals available.

Think About Engaging a Broker

A mortgage broker can simplify the process of comparing offers, recommend products based on your specific needs, and handle the application process. Some deals are exclusively available through brokers. Ensure that your broker has access to a broad range of products by verifying they are a “whole of market” broker.

While brokers are typically compensated by lenders upon the completion of a mortgage, some do not charge a client fee, like L&C Mortgages.

Consider Different Interest Rates

Currently, fixed mortgage rates are among the lowest since 2022. Deciding between a short-term or a long-term fixed rate depends on whether you value stability or flexibility to adapt to potentially lower rates in the near future.

Trackers might be appealing if further rate reductions occur, as they adjust with the base rate. However, fixed rates are generally lower than tracker rates at present.

Secure a Deal in Advance

If your mortgage deal is expiring in a few months, consider locking in a new deal now. This strategy could protect you against rate increases while allowing flexibility to switch if rates fall.

Access Additional Funds If Needed

For homeowners planning renovations or needing extra cash, refinancing can provide necessary funds. If you’re not already remortgaging, consider whether a further advance from your current lender might offer a cost-effective solution.