Gareth Lowman of SPF Private Clients reveals why now may be the time to remortgage.
At the end of last year, Mark Carney, Governor of the Bank of England, said that ‘further modest increases’ in interest rates were likely in an attempt to bring inflation back down to its 2 per cent target. November 2017’s quarter-point increase in the Bank of England Base Rate had indeed already acted as a warning to some that interest rates are not going to stay at record lows forever. More recently, the signals from Threadneedle Street suggest the next rise may be sooner than they had previously thought.
If your current mortgage deal is coming to an end, you are on your lender’s standard variable rate (SVR) or you are keen to switch to a lower rate in anticipation of future rate rises, now may be the time to consider remortgaging.
Competition between lenders is strong and there are plenty of great deals out there. The cheapest rates are available to those with a sizeable deposit or similar level of equity in their home. Fixed-rate mortgages are proving particularly popular because they are competitively priced while also giving peace of mind as they protect borrowers from interest rate rises. However, it is important not to fix for longer than you are absolutely sure about or you may have to pay a hefty early repayment charge (ERC) to get out of the mortgage during the fixed period.
Base-rate tracker mortgages are another option. These may be cheaper than fixes, at least initially, but your monthly payments will increase should interest rates rise. It may be worth considering an ERC-free deal, enabling you to switch to a fixed rate if rates rise without paying a penalty to do so.