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If you still have a few months to go before your current mortgage deal finishes, and you’re hoping interest rates might fall further in the next few months, you may feel that there’s no big rush to remortgage.
However, with no guarantees when the next interest rate reduction will be, and with mortgage rates easing in recent weeks, you might be better off starting your search for a new deal sooner rather than later.
Most lenders allow you to secure your next mortgage deal between three and six months before your current deal ends, enabling you to roll straight over onto your new rate when your deal finishes, rather than moving onto your lender’s typically much more expensive standard variable rate (SVR).
We’ve put together this guide to explain why this could end up saving you a significant amount, and how to go about finding a new mortgage deal.
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Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with a mortgage adviser at HUB Financial Solutions. Speak with a qualified, FCA-regulated adviser you can trust. HUB Financial Solutions is rated ‘Excellent’ on Trustpilot. Please note your home may be repossessed if you don’t keep up with mortgage repayments.
Should I remortgage if my current deal is ending?
If you’re currently on a mortgage deal, you’ll usually move automatically onto your lender’s SVR once this ends.
This could see you paying hundreds, if not thousands more in interest a year, as SVRs are usually much higher than the rate you were paying on your introductory deal.
According to financial website Moneyfactscompare.co.uk, the average SVR is currently 7.27% (nearly double the 4.40% it stood at in December 2021), while the Bank of England base rate is 4% and the best two-year fixed mortgage deals are around 3.69% (although you’ll need a large chunk of equity to secure this rate).
For example, someone with a £150,000 repayment mortgage with 15 years left to run who is borrowing 60% of their property value would be paying £1,371 a month if they were on the typical SVR of 7.27%. Their monthly payments would fall to £1,086 a month if they remortgaged to a best buy two-year fixed mortgage rate of 3.69% – a saving of £285 a month or £3,420 a year.
If you want to roll over from one deal to another to avoid moving onto your lender’s SVR, you will probably want to get serious about applying for a new mortgage a few months before your current deal ends. This way, you will have time to shop around, complete your mortgage application and set things up so that your new mortgage begins when the deal on your current one finishes.
The best thing about starting it early is that it gives you time to watch the market. If rates fall before your next mortgage completes, you could look to switch to a lower rate if one becomes available. However, if rates go up then you’ll have peace of mind that you’ve already secured a competitive deal.
Other reasons to remortgage
Of course, you don’t necessarily need to wait until your current deal is ending to remortgage. There might still be a better deal available than your current one, particularly if it’s been a while since you last looked.
This could be especially true if you’ve paid off a good amount of your current mortgage already. That’s because this should mean you’ll have a larger chunk of equity in your property which could give you access to better deals than before, as lenders will consider you less of a risk.
If your property has increased in value since you bought it – say, because of improvements you’ve made, or because prices in the area have risen in general – then this will also have boosted the amount of equity you own, again boosting your chances of getting a better deal.
However, if you are planning on leaving your existing deal before it finishes, make sure you check exactly how much you’ll have to pay in early redemption penalties. If these are likely to add up to thousands of pounds, this could well outweigh the benefits of moving to a better deal, so you’ll need to crunch your numbers carefully, or ask a mortgage broker to do this on your behalf.
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Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with a mortgage adviser at HUB Financial Solutions. Speak with a qualified, FCA-regulated adviser you can trust. HUB Financial Solutions is rated ‘Excellent’ on Trustpilot. Please note your home may be repossessed if you don’t keep up with mortgage repayments.
Will I definitely be able to remortgage?
Many people in their 50s, 60s and beyond stay on their lender’s SVR because they assume they might be too old to remortgage. However, there’s no reason why age should be a barrier to you getting a standard mortgage, and as long as you can demonstrate that you can afford the monthly repayments, you should still be eligible for mortgage products from several banks and building societies. Find out more in our guide Mortgages for over 50s: what you need to know.
You may also want to consider other options such as a retirement interest-only mortgage or a lifetime mortgage. With a retirement interest-only mortgage, you only pay off the interest on the loan each month, rather than any of the capital itself. The capital is only repaid when you either die or move into long-term care and the property is sold. You can find out more in our article How retirement interest-only mortgages work.
Another option is a lifetime mortgage, a type of equity release plan, where both the interest and capital are paid back when you either die or move into long-term care. Learn more about lifetime mortgages in our guide Lifetime mortgages explained and about how lifetime mortgages and retirement interest-only mortgages compare in our article What’s the difference between a lifetime mortgage and a retirement interest-only mortgage?
If you want to see how much a lifetime mortgage is likely to cost you based on your individual circumstances, our lifetime mortgage calculator can crunch the numbers on your behalf.
You must seek professional advice before you can apply for a lifetime mortgage. You can find an equity release advisor via the Equity Release Council’s (the trade body for the equity release sector) website here. Find out more about equity release in our guide Equity release: What is it and how does it work?
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Are you considering releasing equity from your home? Speaking to an experienced adviser can help you to understand your options.
If you think you’d benefit from expert advice, you can book a free consultation with an adviser at HUB Financial Solutions. A qualified, FCA-regulated equity release adviser you can trust will listen to your needs and talk you through your options. HUB Financial Solutions is rated ‘Excellent’ on Trustpilot.
Please note that equity release will reduce the value of your estate. So if it’s not right for you, the adviser will help you understand some alternatives.
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