Time Is Ticking – Why Remortgage in Spring 2022?

 

This year we will see hikes in National Insurance payments for working people and increases in the cost of living through inflation rises and food price increases and also the cost of energy prices which are due to rise from April. In short, many people will soon start to feel the financial pinch of these changes in their monthly outgoings.

Is it Time to Remortgage?

Mortgage products are devised and issued to market all the time by lenders, but following the latest Bank of England base rate increases in December 2021 and February 2022, and the threat of further inflation this year, new mortgage products will start to be more expensive.

As we look at 2022, a re-mortgage taken out now, will cost you a lot more later this year due to:

1. Fewer mortgage products on the market offering lower repayment rates – as lenders start to increase their lending rates and reduce the number of lower rate mortgage products available

2. The Bank of England’s base rate is expected to rise even further as the impact of rising inflation kicks in.

As the cost of home owning and mortgages look more and more expensive, it could be a good time now to reflect on your existing mortgage deal and see if you can shop around for a better repayment rate, or even consider moving home.

Changing Your Mortgage

If you are a homeowner and you are already paying-off a mortgage, look at the mortgage lending rate you are paying and consider how your repayments might be affected in 2022 and the years beyond if you decide to do nothing. Most variable and repayment mortgages will be affected if they are not Fixed Rate Mortgages. You might be paying a lot more in future months that you expect to.

Fixed Rate Mortgages

Although fixed rate mortgages are not affected by inflation and changing lending rates, if you are coming to the end of a fixed term mortgage, say, 1-3 years left to go, then you might want to check the interest rate you are currently paying. Most fixed rate mortgages taken out over the past few years have benefitted from low interest rates, so it could be that swapping to a new mortgage product this year could put you in an even worse position.

Also, early redemption of fixed rate mortgages can involve paying a penalty to the mortgage provider, so check your mortgage offer wording carefully and consult your mortgage provider for advice. Of course, all avenues require qualified financial advice before jumping ship onto a new mortgage. The repayment impact in the short term, medium term and long-term, based on your own set of unique circumstances, should be thought-through carefully and you should take independent financial advice.

How to Remortgage Your Property

• Read your mortgage offer documentation and calculate the rate you are paying now and for the next few years.

  • What is remaining term on your mortgage?

  • Are they any penalties for early redemption?

  • What will your monthly repayments look like if you do nothing?

• Speak to an independent financial or mortgage adviser who can help you assess the market products and what’s right for you.

• Shop around and see which lender is offering the best rate based on your future needs. There are various online mortgage websites that can compare products and rates.

• Speak to your existing lender. Ask if they can they switch you onto a better interest rate product than you are currently paying. Ask if there is a penalty for early redemption? Discover your options.

 

Rachael Mitchell, Head of Conveyancing adds:

“It’s hard to determine how high the Bank of England’s interest rates will rise in the coming couple of years, but the consensus is that they will rise but we don’t know by how much or for how long. Bank interest rate rises are not new, and during periods of high inflation they can rise significantly (in previous recessions interest rates have risen beyond 15% causing payment forfeiture and re-possession orders), so now is a good time to re-evaluate your mortgage proposition and repayments and see if a re-mortgage or house sale is a good idea for you and if the timing is right for your needs. My advice is not to wait until the summer to find a better rate.”

 

 

 

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