Why are so many people remortgaging at the moment?
With rumours of an impending rate rise by the Bank of England, many are looking to remortgage their homes in order to lock in lower rates. We speak to mortgage broker Sarah Dormer-Thomas, from the John Charcol network, to get her thoughts on increasing remortgage rates and when to consider a remortgage for yourself.
Typically, mortgages are fixed for two or five-year rates. After this, your lender can move you to a standard variable rate for the rest of the term, which will go up or down depending on market activity.
However, Bank of England research shows that longer fixed-rate terms are becoming more popular. As mortgage rates have reached historically low rates during the recent spike in property market activity, the ability to lock in rates for 5, 10 or even 15 years has become appealing to many.
“We are seeing a lot of remortgages at present for various reasons,” Sarah tells us. “We usually contact our clients between 3-5 months of their rate expiry to make sure we have the new mortgage in place in time, so they never pay a high variable rate.”
However, what is unique at present is that mortgage rates are starting to increase after reaching historical lows.
“Rates are very low at present, despite inflation having increased, and this is because lenders still have money to lend. However, as the year comes to a close and the headlines are talking about a potential rise in base rate this quarter, we are experience higher volumes of business with clients wanting to remortgage early.”
Another key trend is that recent economic uncertainty has prompted many to prioritise stability in their household finances. According to recent research, four in five people would consider a fixed rate lasting more than five years if it meant their monthly payments would not change.
Homeowners are looking to lock in lower rates, and Sarah has many clients wanting to remortgage early, despite then having to pay an early repayment charge.
“Usually, I recommend looking to remortgage 3-4 months before the existing rate expires, because then we can assess what is best for the client – a remortgage or a product transfer with their existing lender. Remortgage offers tend to be valid for 6 months, so any earlier than that is futile.”
However, many clients are unaware that they need to undergo conveyancing when remortgaging, Sarah tells us.
“Lenders offering a free conveyancing service is very appealing to clients, but you do get what you pay for here – there is often no personal service or point of contact. The communication in general is done via a portal, which works for some clients, but often does not work, especially for our older, less IT literate clients.”
Sarah recommends to clients that they instruct their own solicitor, in order to get the highest quality, hassle-free service. Sarah also notes that some lenders will give cash back for using your own solicitor.
Laurus’ Remortgage Ready service makes remortgaging simple and hassle-free. If you’re looking to lock in a lower rate, visit our website for more information, or speak to the team using the details below.
