By My journey as a first-time buyer began in 2018. Scrolling through Rightmove while on a beach in Spain, I found my perfect home and, knowing it would be marked as ‘Sold STC’ within a couple of days, immediately asked my parents to view it for me on the same day.
Thanks to technology, I was able to partake in the viewing via video call and I fell in love with the property straight away. That evening, an offer was made and accepted – I never have really learned to switch off on holiday…
Using a respected, qualified, independent and whole of market mortgage broker, I secured a five-year fixed mortgage at a rate of 2.22%.
Needless to say, I enjoyed that mortgage rate and wish I could keep it but the deal is ending and the threat of the Standard Variable Rate (SVR) is upon me (the default interest rate set by the lender that will be charged once an initial deal period on a fixed or tracker rate mortgage comes to an end).
It is time to find a new one, a process that I started preparing for six months prior to my current deal ending.
The months building up to my first remortgage have been alarming as a result of the increasing and fluctuating mortgage interest rates, but last week’s news offered some relief as news of major lenders cutting mortgage rates began to surface.
News of improved inflation figures prompted some lenders to cut mortgage rates. As a result, sixteen HSBC mortgage deals fell on Wednesday 26th July, with a reduction to its standard two-year fixed rate from 6.24 per cent to 6.14 per cent and a 0.20 per cent reduction to its five-year fixed rate for those remortgaging.
501,501 remortgages were carried out in the UK over the last 12 months (BofE) and the typical homeowner remortgages four times during their twenty-five-year mortgage term at an average total cost over that period of £9,960.
Broker fees are often a proportion of this at an average of £300 per transaction and therefore a potential lifetime cost of £1,200.
If your deal is coming to an end and you’re looking to secure a new one, an independent, whole of market broker will have visibility to the majority, if not all, of the products on the market at that time as well as insight into the market as specialists in their field.
A broker will provide you with tailored advice around the best product and rate for you based on your circumstances, affordability and what’s available.
In the current climate, it is important that you seek professional advice to avoid contracting yourself to an unsuitable deal or falling into the lender’s SVR.
The best deals at the moment are likely to cost much more than your previous interest rate; at the moment, SVRs typically range from 7.5% to 8.5%. If so, you should be prepared to remortgage to a rate that is competitive.
To avoid delays that cause you to remain on your lender’s SVR, start looking three to six months before your rate expires.
Another reason you might want to remortgage is because you want a better deal, although this can come with extra fees.
You can be required to pay an early repayment charge (ERC), which can be quite expensive and is typically 2-5% of your outstanding loan, if you are locked into an original agreement.
Additionally, when you pay off any mortgage, there is typically a small exit fee (sometimes known as an “admin fee” or a “deeds release fee”).
The savings earned through remortgaging can still be substantial (especially if you have a sizable amount of mortgage debt), so you shouldn’t automatically rule it out.
However, the reality is that it would be difficult for many homeowners who are now locked into a mortgage agreement to locate a new one that makes financial sense to transfer to (especially if you’d need to pay a significant ERC to leave your existing deal).
This is due to the fact that interest rates are now far higher than they were in the past.
In any event, my advice is to seek professional advice from a reputable broker who has access to the market.
This will give you the best chance of securing a suitable deal and give you peace of mind that you have taken sensible steps to navigate the tumultuous market.
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