What Are My Remortgage Options?
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What Are My Remortgage Options?
Gary Boakes talks us through our remortgaging options. Podcast recorded in July 2023
My mortgage deal is coming to an end. What Are My Remortgage Options?
Speak to a mortgage broker. We can talk through all your options with you. Interest rates have increased over the last 18 months and a lot of people are worrying.
We will guide you through that and help get you the most suitable rate that you qualify for. Ideally, it helps to start looking at this around seven months out from the end of your deal. That gives us time to find you the right deal that you qualify for – and move with the market because it’s changing so fast at the moment.
There may well be moments of change in the next six months – and we are able to jump on that and get you the most suitable rate if we can.
Is now a good time to remortgage?
Most people who are currently remortgaging have probably been on a very nice rate. We’ve had very good rates for the last ten years where a 2% interest rate was the norm. We’re seeing in the papers that rates are now around 6% – which doesn’t make it look like a good time to remortgage.
But you have to remember that when your mortgage ends you will go into a standard variable rate, and those are even higher than anything else. Standard variable rates now are over 8% and nobody wants that, so you’re going to have to remortgage.
The new deal may not be as good as you’ve had previously, but it’s better than potentially sitting on the standard rate for a sustained period. We will obviously get you the best deals we can.
I went through exactly the same myself back in 2008 – we took a two year fixed deal at 6.2% I recall – so I’ve been there myself. This could happen anytime over the next 25-30 years, so you’ve got to take the good with the bad.
How quickly can you remortgage?
The majority of lenders will let you do this six months in advance. A new mortgage charter is coming out from the lenders, which you may have seen in the press. The aim is that every lender goes to that six month period and I think that would work really well.
At the moment, we don’t know which way the market is going to go over the next six months.
It could continue to get higher. It could get better. So it’s very key to lock in a rate now, nice and early. If it gets worse, we will have secured a better rate; but if it gets better we’ve got enough time to switch to a lower rate.
So come to us around seven months before the end of your deal, because it gives us that month to have a chat, get prepared and move quickly.
Can I remortgage before my deal ends?
You can leave your current lender whenever you like, but you’re probably going to have to pay a penalty to do that, called an early redemption charge. It’ll be stated on your mortgage offer. Certainly if you’re in a fixed rate there will be potentially a penalty to leave.
So we would ask why you want to do that. Obviously if rates drop it can make sense. Back in 2008 we had really high interest rates and they started dropping in 2010, and so people were paying to come out of their high fixed deals to get on a lower rate. It was our job back then to work out whether or not that’s cost effective for you.
If you are going to pay a penalty of £6,000, as they can be quite high, are you going to save that amount on the new rate? So you can do it, but it needs to make financial sense.
A lot of people think they need to remortgage to get money out of their property for home improvements, perhaps. But there are other ways we can achieve that. Further advances are a common option, or a second charge loan in some instances. That way you don’t need to exit your current mortgage.
Can I move to a new rate when my current mortgage deal ends?
In most circumstances, yes. There are one or two situations where you might not be able to, but if you can, there are two main options. You can remortgage to a new lender, and we’ll make that as seamless as we can. The other option is a product transfer, where your circumstances suggest that you should stay with your current provider. That’s a very seamless process – the deal will just kick in as the previous one ends.
Circumstances where you can’t do this might be if you had a residential property and they’ve since rented it out with Consent to Let. It may well be that your current provider may not offer you a new rate and you go to the standard variable rate. We would look at different options in this situation as we don’t want our customers to go on that standard rate. We want you to be on a new deal once the current one ends.
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Can I extend my mortgage term?
Yes – as long as it works from an age perspective. With a mortgage, it’s all about what you can manage at the time. Your circumstances won’t stay the same throughout the whole 25 or 30 years that you have your mortgage and that’s one of the great things about the flexibility we have with mortgages in the UK.
We can re-examine our mortgage and change elements to suit our circumstances at that particular time. At the moment we are extending a lot of people’s mortgage terms. With the cost of living crisis and high interest rates, it’s a helpful way to reduce that monthly cost.
I’ve personally extended my mortgage term. We had a baby four years ago and with the high childcare cost, we knew our biggest outcome was our mortgage. So how could we reduce that and make life a little bit easier? So we extended our mortgage term to suit our set of circumstances at that particular time. It’s something that we can discuss with you during our meetings.
Can I fix my mortgage with rates increasing? How long should I fix my mortgage for?
It’s really hard for us to tell you how long to fix for. Ultimately your mortgage is just your mortgage. It’s the risk you’re willing to take that’s the really big thing. We can try and guide you and talk to you about what’s going on in the market and what we feel may happen. But unfortunately we don’t have a crystal ball.
Again it depends on your set of circumstances. The big conversations at the moment are about whether to fix for two years or five years. We’re in a weird market where the five year fixes are cheaper than the two year fixes.
In the past people would choose a two year fix to keep the mortgage as cheap as possible. Right now, that means going for a five year deal. But a lot of people are uncomfortable with tying in for five years and want to gamble that interest rates will drop over the next two years.
We all have different levels of risk that we’re willing to take. Some people are very risk averse. Some want to play the market. We will help you try and get to the right answer for you.
Will mortgage rates go down in 2023?
It’s a really difficult one to answer. Obviously the major problem in the UK right now is inflation. Core inflation isn’t going down as quickly as we hoped, and that is causing the money markets to be unsettled and turbulent.
The Bank of England’s response to that is to increase the banking base rate, which has increased swap rates and led to mortgage rates increasing over the last 18 months.
There’s been another big increase over the last couple of weeks. But then you see a news report saying swap rates are going down, and ultimately this is the real key one for lenders. It’s where they buy their money from.
Earlier in the year, as the banking base rate was going up, swap rates were coming down. We didn’t see a translation between the banking base rate and interest rates. So there’s a lot more to it.
My honest feeling on this is that maybe towards the end of the year, if things calm down and core inflation comes down, then we may see changes in rates. That’s my personal view. We hope to see interest rates drop towards the end of 2023 but maybe it will perhaps be into 2024. But it’s a fast changing market. You never know.
We’ve not seen this type of market for so long. It’s obviously not great that rates are going up but it is quite interesting from an economic point of view. The forecast is for the banking base rate to be 3.5% by the end of next year. We’re at 5% now so technically mortgage rates should drop during 2024, if those forecasts are correct.
Can I re-mortgage with credit card debt?
Yes, you can remortgage with any debt as long as it fits lenders’ criteria around income and expenditure. It’s very dependent on what your debt looks like compared to your income.
We see people buying properties with credit card debts and personal loans all the time, because their affordability allows that. We would just have to look at what your credit card debt is based on your circumstances.
Can you remortgage a Help to Buy loan?
Yes, you can. They are a little trickier so again I’d recommend speaking to a mortgage broker. We’ve done an awful lot of Help to Buy on new build homes and now a lot of customers are coming to the end of the five year period, so the 0% interest rate is ending.
A lot of people believe you have to pay it back at that point but that’s not the case. You can remortgage with a Help to Buy loan – whether you’re repaying it or not. You need a good solicitor behind you and there are some costs as well. It’s a £115 admin fee to remortgage with Help to Buy, plus the extra solicitors’ cost.
In our experience, the majority of people with Help to Buy stay with their existing provider, unless there are some really good deals out that make it worth changing. If you are looking to remortgage to pay back the loan it’s a different conversation – we’ve done a lot of those in the past for customers.
So Help to Buy isn’t a standard remortgage as there’s more to consider. Not as many lenders do it, so it’s a specialist area. It’s definitely one to speak to a mortgage broker about.
How can a mortgage broker help with remortgaging?
It’s an ever-changing market and we can react fast. Since the Liz Truss budget and interest rates rapidly increased last year, anybody who we did a remortgage for back in October was very unlikely to have stuck with that rate.
Come February or March we adapted to the market and changed deals based on what the providers were doing – that’s where we’re worth our weight in gold. We continually review the interest rates and how to improve things for you over the six month period before your rate ends.
If interest rates drop we can jump on it really quickly for you and save you as much money as we can. We have more options – and every 0.1% or 0.2% difference can really help you.
Plus, one of the great advantages of working with Verve Financial is that we don’t charge a fee to arrange your remortgage. We’re purely paid by the lender on completion.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up with your mortgage repayments.