Rate rise expectation behind rush to remortgage

Borrowers are rushing to remortgage to new fixed deals ahead of an expected Base Rate rise.

The latest Money and Credit report from the Bank of England revealed a big jump in the number of remortgages approved in July, the highest figure in more than seven years.

Loans for property purchases have jumped to a 17-month high too.

Why the rush to remortgage?

So what is spurring such heightened activity?

It would appear that the likelihood of a Base Rate rise is pushing some borrowers towards rearranging their finances and looking to secure a decent fixed rate on their mortgage. Mark Carney, the Governor of the Bank of England, has suggested that a rise may be on the cards around the turn of the year, though that talk may have been dampened a touch by last week’s Black Monday drama.

Nonetheless, the expectation is clearly that the Base Rate will increase sooner rather than later, and with it, mortgage rates will begin to push upwards too.

[SPOTLIGHT]Andy Knee, chief executive of LMS, said: “We shouldn’t forget that the Base Rate cannot be kept on hold forever and the Bank of England is pushing towards a tighter monetary policy. There is no reason why homeowners should stall; now is the opportune moment to make the most of competitive rates and we anticipate a continued flurry of activity among homeowners keen to take advantage of this and reduce their monthly outgoings.”

Things to consider when remortgaging

If you are thinking about remortgaging, there are a number of things to consider.

Firstly, do you have to pay a fee to exit your current mortgage deal? If you are still within the fixed rate period of your existing mortgage, you will likely have to pay an Early Repayment Charge, which can be quite significant. Will the savings you make on a new mortgage cover the fee you have to pay?

How has your property’s value changed? If it has gone up since you took out your last mortgage, you may find that you are in a lower loan-to-value band, meaning cheaper mortgage rates. Of course, the reverse is true if your property has lost value.

There are other reasons to remortgage too. According to LMS one in three people remortgaging increase the size of their loan. This is most commonly done in order to pay for home improvements, or to pay off other debts. If that sounds like you, you will need to convince your lender why you need the cash and then provide evidence afterwards (whether that’s receipts for building work or proof that the debts have been cleared).

The best remortgage deals

If you are looking to remortgage, we have picked out some of the best fixed rate deals below over a range of terms and loan-to-values. First let’s look at two-year fixed rate mortgage deals

Now let’s look at five-year fixed rate mortgages

As you can see, the mortgage fees on the home loans with the smallest interest rates are massive. Depending on your circumstances it may work out cheaper for you to go with a deal with a higher interest rate but smaller fee.

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