Is now a good time to remortgage?

With interest rates rising four times in the last three months, and further rises expected later this year, could now be a good time to remortgage?

Key takeaways

• If you're on a standard variable rate or tracker mortgage, now could be a good time to look into a low-interest, fixed-rate mortgage
• 74% of the UK population are currently on fixed-rate mortgages, and if the interest rate is low, you're in a good position and there's no need to remortgage if your deal isn't ending any time soon
• Be aware that if your deal is about to come to an end, you're likely to go onto your lender's standard variable rate - and with interest rates rising, this will be a lot more expensive
• There are still plenty of fixed-rate mortgages available for under 2% interest. We'll show you where to find them

The Bank of England has raised interest rates four times in the last three months.

The latest rise, from 0.5% to 0.75%, means rates are at their highest level since March 2020.

The change will add around £42 a month to repayments for someone with a £200,000 mortgage.

A combination of rising inflation and the war in the Ukraine disrupting global supply chains for food and energy has led to a rise in prices.

The increase in interest rates by the Bank is an attempt to try and reduce that inflation and calm the cost of living.

How do rising interest rates affect the cost of mortgages?

Higher interest rates make borrowing more expensive.

During the pandemic, the Bank of England slashed the Base Rate to an all-time low of 0.1%.

The Base Rate impacts all other interest rates. When it’s low, it costs you less to borrow money, but it also means you make less money in interest on your savings.

When the Base Rate is higher, interest rates on mortgages tend to be higher too.

Higher interest rates on fixed-rate mortgages means that it will cost you more to repay the mortgage in the long term.

That said, if you are already on a fixed-rate mortgage, as 74% of the UK population currently are, your payments will continue to stay the same, despite the rise in the Base Rate.

Variable rate and tracker mortgages tend to follow the Base Rate more closely, so will rise and fall as the Base Rate increases and decreases.

Do you lose money when you remortgage?

Most people remortgage to get a cheaper rate and pay less money on their mortgage as a result.

As long as you are at the end of your mortgage agreement or ‘term’, then you shouldn’t need to pay any exit fees or early redemption penalties.

If you aren’t, be aware that the cost of leaving your current mortgage could run into thousands, so it’s well worth checking first.

In addition, you will often pay fees when securing a new mortgage. They include:

However, if you’re moving to a deal with a lower interest rate, you could save yourself hundreds of pounds each month.

And at a time when interest rates are rising, it's best not to go onto your lender's standard variable rate when your mortgage deal ends.

Is it worth remortgaging early?

The best time to start looking at other mortgages is around four to six months before your current mortgage deal ends.

Most lenders will allow you to lock in a deal with them between three to six months in advance.

So if you’re tied into your current mortgage for another three to six months, you can ‘book’ a deal to start in three to six months' time, at the rate it’s currently being offered by the lender.

That said, if you later find a deal with a lower interest rate, you may have to pay a second lot of fees to secure it.

It can be a good idea to use a broker to ensure you get the best deal for you, as they’ll know the mortgage market inside and out and can often get the best deals.

Should you remortgage now?

The Bank of England’s chief economist has warned that further interest rate rises might be needed to curb inflation.

Some experts are predicting that the Bank Rate could increase to 1.25% by the end of 2022.

Should I remortgage if I’m on a fixed-rate deal?

If you’re on a fixed-rate deal set at a low interest rate, you’re in a great position right now and there’s no need to look to remortgage.

However, if your deal is about to come to an end, you're likely to go onto your lender's standard variable rate - and with interest rates getting higher, this will be a lot more expensive.

So it's worth shopping around now for another low-interest fixed-rate deal before interest rates go up again.

Should I remortgage if I’m on a standard variable rate or tracker deal? 

If you’re on a standard variable rate or tracker deal, your mortgage payments are likely to continue increasing this year.

Now could be a good time to secure a fixed-rate deal at a lower interest rate to protect yourself against this.

With fixed-rate mortgages, you’ll know what your outgoings are going to be every month, and that’s a good thing in a time of economic uncertainty.

by Blackstones

What the Spring Statement means for homeowners and renters

From tax cuts for green home improvements to reduced fuel duty, here’s how the Spring Statement will affect homeowners and renters this year.

Chancellor Rishi Sunak’s Spring Statement 2022 contained few measures that will impact the housing market directly.

But with households feeling the squeeze from the rising cost of living and higher interest rates, the concessions that were announced will be welcomed by homeowners and renters alike.

Even so, there were few big giveaways, and with people’s budgets remaining under pressure, activity in the housing market is likely to slow, while demand for rental homes could increase.

Here’s a rundown of the main announcements from the Spring Statement.

Going green gets cheaper

One of the few measures announced by the Chancellor that has a direct impact on property was the news that VAT will be scrapped on energy-saving technology, such as solar panels, heat pumps, insulation and wind turbines.

The move will reduce the cost of purchasing these devices by 5%. As a result, the Chancellor estimates that someone installing solar panels will save £1,000, while their energy bills will be reduced by £300 a year.

Increase to National Insurance threshold

With households already facing rising energy, food and petrol bills, many had been dreading the rise in National Insurance contributions from 12% to 13.25% in April.

While Sunak has not reversed the increase in the rate, he has offset it for some by increasing the threshold at which contributions start, raising it from £9,880 to £12,570 from July.

The move means 70% of people will pay less National Insurance than they do now, with Sunak estimating the typical employee will be £330 a year better off.

However, those earning more than £40,000 a year will be worse off, with those earning £50,000 annually paying just over £100 a year more than they do now.

In a further sweetener, the Chancellor announced plans to cut the basic rate of income tax from 20% to 19% in 2024, but that is still two years off.

Winners: homeowners and renters earning less than £40,000

Fuel duty cut

The announcement that fuel duty will be cut by 5p was welcome news for struggling motorists reeling from record prices at the pumps.

Even so, the concession only partially offsets the increase to petrol and diesel prices seen since the start of the Ukraine crisis.

The move will save the average motorist just £100 a year, or £8 a month, according to the Chancellor.

While the fuel duty cut will help homeowners and renters, particularly those in rural areas who do not have the option of using public transport, it isn’t much to get excited about.

Winners: homeowners and renters who own vehicles

Changes to student loan repayments

This was not part of the Spring Statement, but documents accompanying it showed that future changes to student loan repayments will save the Treasury a notional £11.2 billion in the coming tax year, due to the way student loans appear in government accounts.

Under the changes, students in England starting university in 2023 will have to begin repaying their student loan when their income reaches £25,000 a year, rather than £27,295 currently.

The term over which they have to repay the debt before it is written off will also increase from 30 years to 40 years, although the rate of interest they have to pay will be reduced.

The move will mean that unlike under the current system where only a quarter of students are expected to repay their student loan in full, 70% are likely to do so under the new one.

The move is expected to save the government an average of £6,200 for every student who has taken out a loan, according to the Institute for Fiscal Studies.

Losers: those with student debts who would not previously have reached the repayment threshold or repaid their loans within 30 years, likely first-time buyers

Rising cost of living

Despite the concessions unveiled, there was no significant help for households with the rising cost of living.

For example, there were no additional increases to the Universal Credit or basic state pension to take account of the high rate of inflation.

Instead figures from the Office of Budgetary Responsibility (OBR), which accompanied the Spring Statement, suggest the situation is likely to get worse.

It predicts inflation – the rate at which the cost of living is rising – will average 7.4% this year and peak at 8.7%. It is currently running at a 30-year high of 6.2%.

The OBR warned that real household disposable income is set to drop by 2.2% per person in the coming year, the biggest fall since records began.

Impact on the housing market

While measures to reduce the impact of a hike in National Insurance contributions and the fuel duty cuts are welcome, in reality, the savings for consumers are small and are likely to do little to offset the rising cost of living people are now facing.

Richard Donnell, executive director at Zoopla, thinks the rising cost of living will impact the rental market by causing people to stay where they are and delay getting on the housing ladder.

He said: “Those most affected by higher energy and household bills may choose to stay put in their existing rental home, as the demand for rental property has led average rents for new lets to rise around 8% on the year.

“At the same time, the rising cost of mortgages could mean that more renters put off their first step onto the housing ladder, staying in the rental sector for longer.

“All of this will increase demand for rental properties, while the supply of homes for rent is constrained, underlining the importance of policies to support the provision of rental homes at every level of affordability.”

Meanwhile, pressure on homeowners’ budgets could also deter people from trading up the property ladder.

While the housing market started the year on a strong footing, demand is expected to cool in the face of economic headwinds, leading to slower price growth.

by Blackstones