Matthews IFA Ltd
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Millions set to remortgage

Millions of homeowners are expected to remortgage in the coming months as the prospect of a rise in the Bank base rate looms large.

Set at 0.5% since 2009, UK homeowners have enjoyed bargain basement mortgage deals for several years.

But figures from the Council of Mortgage Lenders, show that the percentage of mortgages on standard variable rates (SVRs) has soared from 49% in Q2, 2007 to 67% in Q2, 2014. This means that millions of homeowners face a hike in their mortgage payment rates if the base rate rises in early 2015, as expected.

Already, SVRs have been rising steadily in recent years, (even without a base rate rise) from an average of 4.61 per cent in May 2009 to 4.88 per cent in May 2014, according to the comparison website,

If you currently have a fixed rate mortgage, your mortgage rate will jump to the prevailing SVR when the fixed rate term comes to an end, unless you find a better deal elsewhere.

Some borrowers will find they cannot switch to a different mortgage or provider because they are in negative equity or they do not meet their lender’s affordability criteria or their loan to value/loan to income ratios.

If you can remortgage, brokers recommend switching to a fixed rate mortgage while competitive deals are still on offer, because interest rates can only go in one direction from now on.

The good news is that rising house prices in some parts of the UK mean that some ‘mortgage prisoners’ who were previously in negative equity will now be able to move.

Many people on SVRs are paying more than they need to and could fix at a lower rate. Two year fixes are available at around 2% and five year fixes at 3+%.

To get the best deals, you will need a deposit of 25-40% and have your paperwork lined up to prove your income and outgoings, including childcare costs.

If you are within six months of coming to the end of your present deal, please contact us so we can give you some guidance on how to best prepare your finances, in order to get the best remortgage deal possible.

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