Is Now A Good Time To Remortgage?

In the current housing market, homeowners nearing the end of their mortgage deals are faced with a pivotal decision: to remortgage or not, especially against a backdrop of fluctuating interest rates and economic uncertainty.

This article explores the intricacies of remortgaging, offering valuable insights into whether now is an opportune moment to secure a new mortgage deal or better to wait out the market’s volatility.

We delve into what remortgaging entails, the potential benefits and drawbacks in today’s economic climate, and how to tackle the complexities of switching deals or lenders.

With practical advice and expert analysis, this guide aims to provide you with the knowledge needed to make an informed decision that aligns with your financial goals and current market conditions.

What does remortgage mean?

A remortgage is where you still live in your current home but apply for a new mortgage with your existing lender or move to a different one, if they’re offering better terms. You can choose to remortgage just the remaining balance or increase your borrowing using equity in your property if its value has increased sufficiently.

Remortgaging becomes an option, usually, when you approach the end of a particular interest rate offer period, whether that’s a fixed-rate offer or variable rate, allowing you to find a new deal rather than remain on your existing lender’s standard variable rate (SVR). 

If you’re unfamiliar with the terms above, here’s a quick guide to familiarise you with them:

• Remortgage: This is the process of switching your existing mortgage to a new deal, either with your current lender or a different one. This can be done to take advantage of better interest rates, adjust your loan terms, or borrow additional funds against your home’s equity.
• Fixed-Rate Mortgage: A type of mortgage where the interest rate remains the same for a set period, typically 2, 5, or 10 years. This offers stability, as your monthly repayments won’t change during the fixed-rate period, making budgeting easier.
• Standard Variable Rate (SVR): The interest rate you’re automatically moved onto after your fixed-rate, tracker, or discount mortgage deal ends. SVRs are set by the lender and can go up or down at any time, often influenced by changes in the Bank of England base rate.
• Tracker Mortgage: A type of mortgage where the interest rate is linked directly to the Bank of England base rate or another external rate and will move up or down in line with changes to that rate. This means your monthly payments could vary over the term of the deal.
• Discount Mortgage: A discount mortgage is a type of variable-rate mortgage where the interest rate is set a certain amount below the lender’s SVR for a fixed period. While the rate can fluctuate, it remains below the SVR, offering potential savings compared to the lender’s standard rate.
• Equity: The portion of your property that you truly “own”—that is, the difference between the property’s value and the amount you still owe on the mortgage. Equity increases as you pay off more of your mortgage or if your home’s value rises.

Should you remortgage now or wait?

Typically, a remortgage aims to try to save money on your repayments by finding a better – cheaper – interest rate deal than the one you had before. The difficulty with anyone looking to remortgage right now is the outlook for interest rates has completely changed.

At the time of writing (April 2024) the average two-year fixed rate deal is 5.21% and 4.79% for five years. With the Bank Of England base rate at 5.25%, these figures are likely to remain the same until the rate changes.

All of this means anyone whose current deal is about to expire may have to accept that, regardless of what new deal they may now qualify for, their repayments are likely to go up not down.

However, while this increase places more pressure on monthly outgoings, remember the goal of remortgaging is to try to save money from the point you’re at right now by minimising the impact on potential future rises in interest rates over the coming months or years. Whatever rates were in the past – even just a few months ago – is irrelevant.

How long does a remortgage take?

Anywhere between 4-8 weeks is a solid timescale to work towards for a remortgage. Sticking with your existing lender should, in theory, make things much quicker and more straightforward. In reality, this would be a product transfer rather than a remortgage and also negates the need for a solicitor as usually no legal work would be involved.

However, now perhaps more than ever, the opportunity to consider moving your mortgage to a lender offering better terms shouldn’t be dismissed purely based on speed to completion.

If the aim is to save money then the only way to achieve that is by conducting a thorough comparison of all the current remortgage deals available on the market. The quickest and smartest way to do that is by enlisting the help of an experienced remortgage broker.

Not only will a broker be able to identify the best remortgage offers available right now, but they’ll also be able to assist with the application process required for switching lenders – ensuring this is completed as swiftly as possible.

How long does it take to refinance and release equity?

If you’re looking to release some equity from your property then the timescales mentioned above should still stand, albeit expect this to be more towards the latter end and around 8 weeks being more realistic.

This is also where a solicitor will be required to complete your remortgage, as a valuation and new mortgage offer will be needed. Your solicitor will deal with all the legalities surrounding the equity release and signing of the new mortgage deed.

On a positive note, with the rise in property prices in recent years, if the value of your home has risen significantly since you took out the original mortgage, the loan-to-value of your borrowing will have fallen. This can make you eligible for more competitive interest rates as more lenders vie for your business.

Remortgage calculator

If you want a quick snapshot of how this could all look for you in terms of repayments when you remortgage, you can use our calculator below. Simply input the details for your property and current mortgage and the calculator will do the rest.

Your broker will be able to provide a more accurate picture, using the best current offers available in the market.

Remortgaging checklist

If you’re thinking of remortgaging soon or remortgaging for the first time, use this handy checklist to understand the process:

1. Evaluate Your Current Mortgage

• Review the terms of your existing mortgage, including interest rate, type (fixed, variable, tracker), and any early repayment charges.
• Determine the remaining balance and how much of your home you own outright (equity).

2. Assess Your Financial Goals

• Decide what you want to achieve by remortgaging: lower monthly payments, a shorter mortgage term, or releasing equity for large expenses.

3. Research the Market

• Compare current mortgage deals available from various lenders, focusing on interest rates, terms, and eligibility criteria.
• Consider the rates and fees associated with remortgaging to understand the overall cost.

4. Check Your Credit Score

• Ensure your credit report is up-to-date and accurate. A higher credit score can help you secure better mortgage deals.

5. Calculate the Potential Savings

• Use our calculators to estimate how much you could save by switching to a new mortgage deal, taking into account any fees and penalties.

6. Consult a Mortgage Broker

• A good broker can offer expert advice, find deals that match your needs, and help navigate the application process.
• Discuss your financial situation and goals to get tailored recommendations.

7. Prepare Your Documents

• Gather necessary documentation, including proof of income, identification, and details of your current mortgage.
• Organize financial statements and any other documents required by the new lender.

8. Consider the Timing

• If your current deal is about to expire, timing your application can help avoid moving to a higher standard variable rate (SVR).
• Plan for any early repayment charges and how they affect your decision to remortgage now or wait.

9. Apply for the New Mortgage

• Once you’ve chosen a deal, proceed with the application. Your broker can assist with this process, ensuring it’s as smooth as possible.

10. Legal and Valuation Checks

• Your new lender will likely require a property valuation and legal checks. Be prepared for these steps, which can affect the timeline and cost of remortgaging.

11. Review the Offer

• Carefully read through the mortgage offer from the new lender. Ensure it meets your expectations and financial goals.

12. Finalize the Remortgage

• Once you accept the offer, your solicitor and the lender will complete the legal work to transfer the mortgage.
• Confirm the start date of your new mortgage and the cancellation of your old one.

Following this checklist can help streamline the remortgaging process, ensuring you’re well-prepared and informed at every stage, leading to a smoother transition to your new mortgage deal.

Is it worth paying exit fees?

If your current deal ends within 6 months, the good news is that most lenders allow you to reserve a new fixed rate deal now, which you’ll automatically switch onto when your current deal ends, without paying an exit fee.

Again, this might be a higher rate than you’re currently on, but it’s still likely to be lower than the standard variable rates and even fixed rates available for the foreseeable future. If you’re further than 6 months away from the end of your deal, then in most cases, you would incur an exit fee to leave your current deal.

This is where it becomes a more difficult decision, as you’ll need to weigh up whether the exit fees are worth paying to get a rate that’s unlikely to be available later. If interest rates continue to rise at the current rate, then an exit fee may be a very valid expense, however, an experienced broker would help you to complete these calculations more accurately.

If you get in touch we can introduce you to a broker we work with. They’ll be able to look at all of the options available for your circumstances and determine whether or not you would be able to save money by remortgaging now as opposed to waiting.