Thousands of homeowners up and down the country are locking into super-cheap home loans by remortgaging, new figures have revealed.
According to the Council of Mortgage Lenders , around 34,700 borrowers remortgaged in November, up 13% from the year before. The value of those new mortgages was up by 14% on the same month in 2015, totalling £5.8 billion.
It’s a smart move, with mortgages continuing to sit at historically low levels.
However, if you’re thinking of doing the same, you might want to get a move on, with Ishaan Malhi, founder of broker Trussle , warning the “clock is ticking” for homeowners looking for a cheap deal.
When you take out a mortgage, generally you will initially benefit from a promotional rate.
So for example you might fix your rate for two or three years, or track the Bank of England’s base rate plus a certain percentage for a year or two.
However, once you come to the end of that period, you’ll move onto the lender’s Standard Variable Rate. This tends to be much less attractive, and is also subject to being increased at any time, irrespective of what happens to base rate.
For example, right now you could fix your rate with Santander for two years at 1.23% if you have a hefty 40% deposit. However, once that fixed period ends, you’ll move onto its SVR which is a punishing 4.49%.
On a £150,000 mortgage, over a 25-year term, that would see your mortgage repayments jump from £581 a month to £833 a month.
However, if you remortgage to a new deal once you come to the end of your initial promotional deal, you won’t face such a massive payment shock.
In fact, you might actually save money on your monthly repayments!
According to a study by TSB , the average homeowner could save almost £100 a month on their repayments by remortgaging. That saving quickly snowballs into some seriously significant sums if you keep on top of when your fixed or tracker rate is ending, and switch to another cheap deal.
Ian Ramsden, director of mortgages at TSB, said that remortgaging could make a huge difference to family finances.
He added: “It could mean being able to afford a family holiday, carry out much needed home renovations, or simply help ease the pressures on household finances each month.”
By historical standards, mortgage rates today sit at incredibly cheap levels, making remortgaging even more attractive.
However, before Christmas, a number of lenders pulled their cheapest fixed rate deals, replacing them with higher priced loans.
That’s because swap rates - the rates at which banks lend to each other - began to rise.
According to Mark Harris, chief executive of broker SPF Private Clients , swap rates have “stabilised” of late, with some lenders reducing their rates again. However, he warned that Theresa May’s confirmation of the Government’s Brexit plan could result in swap rate “volatility”.
Mark Dyason, director of broker Edinburgh Mortgage Advice , suggested that it was now “very clear” that the very cheapest deals were now a thing of the past.
He added: “Rates are still incredibly competitive, yes, but if people want to secure the best of what's left, they need to act and soon. While we are seeing more remortgaging, there could be a lot more and homeowner apathy could catch many out further down the line.”
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