With millions of low fixed-rate mortgage deals expected to come to an end this year, Britons are being urged to plan ahead to secure the “cheapest deals possible”.
While lenders have been cutting interest rates recently despite another Bank of England Base Rate rise to 5.25 percent, deals still remain largely expensive leaving many questioning the best course of action to secure a lower rate.
Claire Flynn, Confused.com’s mortgages expert, commented: “While inflation has slowed to 7.9 percent, it’s still far above the Bank of England’s target of two percent, meaning [the Base Rate] could increase further over the next few months.
“While mortgage borrowers might be relieved to hear some of the UK’s biggest lenders are reducing rates, those due to remortgage still face much more expensive deals than in recent years. If you’re in this position, while you remain likely to face a rate increase, there are a few steps you can take to improve your chances of getting the cheapest deal possible.”
Look into remortgaging options early
According to Ms Flynn, mortgage offers are usually valid for around six months, which means people can secure a new deal ahead of time and switch automatically when their current deal ends. This will help avoid facing steep early repayment charges.
Ms Flynn added: “This also stops you moving to your lender’s standard variable rate, which is normally more expensive than other deals in the market. If you opt for a fixed-rate mortgage, this also means you won’t be impacted by any further rate increases. And if rates reduce before you change to the new deal, you can switch again.”
Consider overpaying your mortgage
For those currently on a low rate who can afford to pay more, doing so might allow people access to lower loan-to-value deals when they remortgage.
Ms Flynn said: “This normally means better rates. You can do this monthly or in a lump sum. But lenders usually have a limit on how much you can overpay before they charge a fee.”
However, Ms Flynn noted that those who are on their lender’s standard variable rate or are opting into certain tracker deals, usually don’t face early repayment fees so they can “overpay as much as you like”.
Ms Flynn said: “Contact your lender or check the terms and conditions of your deal to find out your overpayment options.”
Speak to a whole-of-market mortgage broker
An independent adviser can compare mortgage deals from across lots of lenders to find the best deal for an individual. While it can be tempting to stick with the same bank or building society, Ms Flynn said: “It’s worth looking at all of the options.”
She added: “In the current market, there can be significant differences in the rates on different mortgage deals. So, getting expert advice could help you find the best deal and save you a lot of money.
“If your mortgage rate has increased and you’re concerned about making your mortgage payments, speak to your lender.”
Due to the increases in rates, many UK lenders have signed up to the mortgage charter to support borrowers. Measures of this charter include the option to extend a mortgage term or switch to interest-only payments for a temporary period of time to reduce monthly payments.
Ms Flynn noted: “But there are a number of aspects to consider before taking either of these routes. For example, you might end up paying more in interest overall. Make sure you speak to your lender and consider all the potential impacts before making a decision. You may also want to consult a third-party charity that can offer impartial debt guidance, such as Citizens Advice.”