Mortgages: is it time to fix? Should you consider remortgaging?

With mortgage rates staying low for the time being, should you consider remortgaging?
It is hard to believe that the bank base rate has been 0.5% for nearly three years (since March 2009). Although inflation for November was 4.8% – which is well above the Bank of England target rate of 2% – the December 2011 meeting of the Monetary Policy Committee voted to keep the interest rate at just 0.5%. Many predict that it will remain this low for still some time to come.

You probably agree that rates are not going to come down any further and could start to increase next year. As this is the case, you may be asking yourself why you should consider remortgaging now.

You may have been lucky and locked yourself into a very attractive tracker rate before rates fell. However, if you are on a standard variable rate, you may find there’s a lower fixed rate that’s currently available. Fixing the rate now could be very attractive, especially if your loan-to-value is low (that is, if the amount of your mortgage is a lot less than the value of your property).

It’s always important to research your options.

For example, at the time of writing (end of December 2011), here are the current standard variable rates for some of the major lenders: Halifax 3.50%, Santander 4.24%, Nationwide 2.50% on mortgages reserved pre 30th April 2009 and 3.99% after, and NatWest 4.0%. Are you paying this amount, or maybe even more?

If yes, you may find that reviewing your existing arrangements means you could save money by remortgaging. There are attractive deals on offer at the moment. For example, I have recently seen a two-year fixed rate of only 2.99% and a five-year fixed rate of 3.39%, both at 75% loan-to-value. These are just two examples of the sort of rates lenders are offering. It’s not just residential rates that have become very attractive; there are some competitive buy-to-let mortgages around as well.

You may be thinking that you’ll wait until rates increase and then fix. The problem is that lenders factor in market conditions when calculating their fixed rates, and therefore any good deals are likely to increase before the base rate does.

If you do want to fix at a low rate, you do not necessarily have to remortgage with a new lender, as it is also possible to obtain a fixed rate from your existing lender. Your current lender should always be the first point of call because it means there will be no legal costs and it is highly likely that you will not need to have a survey.

Alternatively, you may wonder whether you should take out a tracker mortgage. There are competitive tracker rates currently available but with interest rates likely to increase at some stage in the future, and very little difference between some of the various mortgage options, we can safely say that there is a lot of choice out there at present.

If you have a repayment mortgage, the other consideration when interest rates are low is the term of the mortgage itself. You may not be aware that it is possible to reduce the mortgage term and generally there is only a small administration fee to do so. This can save you a huge amount of interest over the longer term. Because you are not actually redeeming the mortgage you can reduce the term even if you are tied into the product.

At Monetary Solutions we offer a free consultation without obligation. We would be happy to look at your current mortgage rate and see if we can improve on it for you. If you would like to know what options are available to you, please phone us today on 020 8760 9940.

Your home may be repossessed if you do not keep up repayments on your mortgage.

For mortgage advice we can charge a fee of typically £500 or we can receive commission from the lender.