Thursday, 28 May 2020

Is it time to re-mortgage?

The average interest rate for both two-year and five-year fixed rate mortgages have dropped to the lowest level since records began in 2007, according to Moneyfacts. I was surprised to learn from my mortgage broker a while ago that most people don’t re-mortgage when their initial mortgage term expires, meaning they could be overpaying by thousands of pounds! With these record-low rates, it seemed sensible to take another look at the issue.

The average interest rate for a two-year fixed mortgage is now just 2.09%, with interest rates on offer for five-year fixes barely higher at 2.35%. I’ve always been a fan of long-term fixed-rate mortgages for their certainty and the avoidance of both faff and fees in having to re-mortgage as regularly. Unfortunately, I’ve held that belief since I started to buy property; locking in at rates of 6%+ in 2008, only to see the base rate collapse in the following couple of years!

Whilst I wrote about the possibility of negative interest rates last September (as banks in Denmark were actually paying people to take on mortgages), with the UK base rate having dropped to a record low of 0.1% in response to the Covid-19 pandemic it seems a reasonably safe bet that things can’t get much cheaper…then again, as I type, it seems the Bank of England are reviewing the introduction of negative interest rates for the first time in its 324-year history to help stimulate an economic recovery.

Even if rates do drop further, it’s a certainty that re-mortgaging now if you are sat on your lender’s SVR (Standard Variable Rate) will save you a lot of money. Bear in mind the average SVR is around 4%-5% and, with the rates mentioned earlier, a homeowner with a £200,000 mortgage could save £4,820 a year by switching to a two-year fixed rate deal.
It’s also possible that your property has increased in price (house prices in Chichester are up 17% in the past five years), so you may have additional equity in your home. For some, this will open up the possibility of lowering their LTV (Loan To Value) so they can access even better terms and mortgage rates.

This could be especially useful at a time when mortgage lenders have been pulling their mortgage products in droves, having reassessed their appetite for risk. The number of different mortgages homeowners could choose from on 20th March was 5,222 - that figure has halved since. The greatest decline in availability though is for those needing to borrow a higher proportion of their property’s value. For those with less than a 10% deposit, there are around 90% fewer options available than in mid-March, whilst average interest rates on offer have actually increased.

So, if you haven’t re-mortgaged for a while it might be worth a call to your local mortgage broker. The initial costs in doing so should be more than offset by the savings you’ll make over the term of the mortgage.

This article was featured in...

If you are looking for an agent that is well establishedprofessional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

Chichester rental valuation

No comments:

Post a Comment