The cost-of-living crisis has given homeowners one gigantic reason to consider remortgaging – so how could it help you?
You don’t need us to tell you these are challenging times. Prices are going up everywhere and wages aren’t going up at anything like the same rate. So could your home help you out of a hole? Here’s why remortgaging now could be a very, very smart move.
1. Because prices are going up
We’re all seeing the same scary predictions about energy costs this winter, but it’s not just energy. Fuel prices may be off their recent peaks but they’re still close to 50% higher than what they were this time last year. Everything from food to clothes to your Amazon Prime subscription have increased in price recently too.
Remortgaging won’t lower those prices, but it could ensure you have more available cash to cover them. If your mortgage is on the current standard variable rate (SVR - that is, the rate you get if you’re not on a discounted deal), we’ll almost certainly be able to save you money. But even if you’re locked into a deal, you may find that paying the penalty to escape it in favour of a better deal could still be worthwhile. It’s worth having a chat with us to see what your options are.
2. Because interest rates are going up
The Guardian recently reported that around one million homeowners are on the SVR. As long as interest rates are low, that probably doesn’t present too much of a problem (although you’d still usually be better off fixing). But interest rates aren’t as low as they were. In recent months the Bank of England has increased the base rate five times, taking us from 0.1% to 1.75%. Some are predicting it will be at 2.6% by the end of 2023. As a result, the SVR has increased too. At time of writing (August 2022) it’s at 4.65%. it could be closing in on 6% by the end of next year.
Remortgaging now could not only save you money now but protect you against further increases and help you ride out the current situation with a relatively attractive deal until (hopefully) things look a little brighter in a few years.
Remortgaging now could not only save you money now but protect you against further increases and help you ride out the current situation with a relatively attractive deal until (hopefully) things look a little brighter in a few years.
3. Because you could use your remortgage to consolidate debts
What if the current price rises have already exhausted any savings you had and you’ve been using credit cards to make ends meet? Remortgaging could help you press reset. By rolling up credit card and other debts with your mortgage, you’ll get the chance to start afresh, with just one payment to cover everything.
It’s important to realise that this isn’t the cheapest way of doing it, but you will be able to spread the repayments over a longer period.
4. Because you could use your remortgage to release equity
Equity is the difference between the value of your home and the amount you still owe on it. If you’re a good few years into your mortgage, the combination of rising house prices and repayments will mean you’ve probably built up a significant pot of equity in your home.
Remortgaging could help you access that pot, and you can then use the money to fund home improvements, buy a car, take a holiday or simply act as a rainy day fund to ensure you can manage over the next few years.
5. Because you could reduce your term
When most homeowners become homeowners for the first time, their circumstances are very different to those a few years down the line. As the years progress and their income increases, there should be a little more money available to pay down the mortgage faster. The faster you can pay off your mortgage the less interest you’ll pay and the quicker you’ll be able to enjoy more of your disposable income.
That’s not all. If you’re one of the many people who’s never remortgaged, you could find that switching to a lower rate could help you pay off your mortgage faster without paying any extra each month, because more of your money is being used to pay off the mortgage rather than pay interest.
So even if you can’t afford to pay more, you could find paying the same with a better deal could help you save thousands in the long run.
6. Because you may be able to lock in a deal now even before your deal has finished
You’ve always remortgaged when your existing deal ends. You’d remortgage now, but your existing deal still has a few months to run.
What you may not realise is that you may be able to lock in your next deal now at lower rates and start paying once the existing deal expires. We can help you find deals you can take advantage of now.
Any deal will do?
Not all remortgage deals are the same. In addition to the monthly payment, you may have an arrangement or product fee, and if you’re currently locked into a deal there’ll probably be an early termination fee to pay too. You may not have to pay all those fees up front – you could add at least some of them to the mortgage, but they can be the difference between a remortgage that seems like a good choice and a remortgage that really saves you money.
That’s why it’s so important to talk to an expert. So to find the right remortgage for you, talk to us.
