The impact of Brexit on the UK property market is still difficult to gauge. While our future outside the EU remains murky, a few of the shorter-term effects have begun to crystallise. For mortgage holders, the future looks rosy; Bank of England rates have come down, allowing banks to borrow more cheaply and mortgage rates to fall. Predictably, thoughts are now turning to that most baffling stage in the mortgage life-cycle: the remortgage.
In the old days, it was normal to stay with one lender for the full term of your mortgage. Nowadays, switching – or remortgaging – is the norm; borrowers faced with a huge amount of choice, driven by healthy competition in the ever-expanding pool of lenders, are quite rightly unwilling to settle.
We’ve all heard Brexit had a dampening effect on the property market. Broadly speaking this may be true, but in the remortgage sphere the picture is very different. August is traditionally a quiet month for mortgages, but this year the Council of Mortgage Lenders (CML) reported a seven-year high in the number of people seeking to remortgage. It may seem strange to be switching deals in a time of economic uncertainty; if you are wary of taking the leap, you are not alone. But those borrowers responsible for the increase in remortgage business since Brexit are onto something. Indeed, research from conveyancing specialists LMS shows 66% of those remortaging in the UK are planning to remortgage again in the next 4 years.
There are three main reasons why a borrower might look to remortgage. The first is simply to save money. Without mentioning the C-word prematurely (although we did spot a certain set of lights going up on Oxford Street some weeks ago now), we are approaching the time of year when it’s especially useful to have some extra cash in the bank. Anyone coming to the end of a fixed rate period can suddenly find themselves on their lender’s standard variable rate (SVR), which is likely to be a significant jump; monthly payments shoot up for the majority of borrowers in this situation. Even if you are not about to revert to an SVR, remortgaging could still reduce your monthly expenditure. In an increasingly competitive market new deals are popping up all the time, and rates that would have sounded ludicrous back when you were arranging your mortgage have become average.
The second reason is to move to a different type of product for added security or flexibility, depending on your circumstances; a fixed rate, for instance, is an attractive option for those who need to know exactly what their monthly outgoings will be.
The third reason is to release equity. For most homeowners, the majority of their money is tied up in their property. Now is a fantastic time to borrow, meaning a remortgage is a good option for those looking to take advantage of an investment opportunity.
Whichever category you fall into; it is well worth doing a bit of window shopping to get an idea of the offers available. Yorkshire Building Society, for instance, has just caught everyone’s attention by releasing a two-year remortgage fix at 0.98%. Although that particular product requires borrowers to have a deposit of 35%, there are other sub-1% deals that are worth investigating. For more information on a range of the best remortgage rates available on the current market, you can view our latest rate card here.
If you are planning to switch, it is important to engage an experienced broker who will help you do the maths; the lowest rate doesn’t necessarily mean the cheapest deal overall when hidden fees are factored in.
We want to make sure our clients are aware of the options available to them, particularly if they could be making significant savings. Please do get in touch if you’d like to discuss your situation with our specialist brokers.