Why remortgaging your home now is such a good investment decision
Whether you’re a lion or a mouse when it comes to investing, hopefully you can spot a good opportunity when it happens. UK interest rates are still at 0.25%. This is their lowest level since the Bank of England was established in 1694. On the back of this, available rates for remortgaging your home have dropped to levels previously unimaginable. The average two-year fixed-rate mortgage is currently 42% cheaper than in 2014, says the Bank of England. Five-year rates are down 38%.
Huge competition among lenders has led to a battle for new customers. It means some of the lowest remortgaging products ever are now on offer. Happily for borrowers, there’s no sign of the lenders' rivalry for customers stopping soon too. So, if you’re thinking about remortgaging your home, now’s a good time.
Do you have equity in your property?
And you’re not locked into a fixed deal?
Or you’re nearing the end of your term?
Or you’re on your lender’s standard variable rate (SVR)?
(This is the default rate most fixes and trackers revert to when the introductory deal finishes.)
In this case, your savings can be huge. Most SVRs are at 4% or higher. Then you’re in an ideal position to take advantage. Remortgaging could save you money and release cash.
Remortgage your home and save £100s
“Are you already a homeowner and you are not on a super-cheap mortgage? Then it’s got to be worth seeing how much you could save on mortgage repayments,” says the author of the popular investment blog Monevator.
“Why are these puny rates not raved about like soaring Dotcom stocks or National Lottery winnings in the 1990s? They’re more lucrative for most people,” he asks.
Actually, more of us are recognising the grab-it-now opportunity that remortgaging our homes is. The housing market is sluggish. So remortgaging activity is now propping up the slowing mortgage market. In April alone, it accounted for 33% of total lending.
A total of 38,475 people in the UK remortgaged their homes in April. That’s an 8% increase compared to March and a 10% annual rise.
Remortgage and protect against inflation
Monevator believes that having a mortgage is a financially savvy move. That’s long as you can afford the repayments of course. The reason is that inflation is rising. At the date of writing (May 2017), it stands at 2.7%, up from 2.3% in March. It’s estimated to be 3% by the year end. However, the Bank of England has opted to keep its base rate at 0.25%.
What does that mean for remortgaging your home? Monevator explains: “Anyone who thinks a mortgage is bad news when inflation is running high is wrong. An affordable mortgage secured on a real asset – a house – is an excellent thing to have at times of high inflation.”
That’s providing you secure a remortgaging deal at less than the rate of inflation. With inflation headed to 3% and your cheapest two-year fix only charging you, for example, 1.49%, you'd get what Monevator describes as “one heck of a deal”.
“Sure, you’ll have to make debt repayments every month. But for the next couple of years, it’s likely that inflation will be eroding a … mortgage as fast as the bank can bill you for it,” he says.
Your options for remortgaging your home
The remortgaging rates available depend on how much of your home’s value you’re borrowing.
Do you have plenty of equity in your home? With current offers around now for a two-year fix, you’re in strong position if you’ve a 40% deposit.Typical rates lenders are offering now range from 1.19% to 1.83%. For a 10% deposit, rates are around 1.99%.
Certain yours is a home for life? Then typical rates for a 5- and 10-year fix with a 40% deposit are 1.74% and 2.49%. For a 10% deposit, rates are around 2.74% and 3.89%.
Of course, there are arrangement fees and terms and conditions with all these offers. And penalties for ending your current fixed rate mortgage early. We explain about these here. But even with these, many deals still make financial sense for a lot of people.
Get the best remortgaging advice
Calculating the money you could save from remortgaging your home and choosing the right deal can be befuddling. Our 10-point checklist here will help you get ready to remortgage. Follow it and you’re more likely to have your application accepted too.
If you’re comfortable with navigating the best buy tables and comparison sites, then take a DIY approach to remortgaging. But many people prefer to have the reassurance of a mortgage broker. That’s because the information about what different lenders accept isn’t available to the public.
A good broker will secure you your most competitive rate. Then they’ll make sure you’re eligible for it, saving you wasted applications.This is even more relevant if you have special circumstances such as being self-employed.
Grab the moment: remortgage while rates are low
"Some old wolf will come along and tell us that mortgages are terrible if there’s a big recession and you lose your job and interest rates rise, and you can’t keep up the repayments. Wise and true," says Monevator.
"Fact is though, nearly everyone reading this article will at some point have a mortgage. Better to get them when they’re cheap."
Want help on the information supplied here or to talk about your remortgaging options? Then feel free to contact us here.
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