Those thinking about getting on the property ladder will often question if now is a good time to remortgage, or if they should wait a little longer. After nine years of low base rates, borrowers were surprised to see rates drop even lower. In the summer of 2020, rates fell from 0.5% to 0.25%, a new all-time low.
Mortgage rates are determined by many factors, including the cost of borrowing, the risk of lending, and competition for customers. The Bank of England base rate is also a good indicator of the kind of rates you might be offered. So with rates at a current all-time low, is now a good time to remortgage?
Buying when property prices are low is not the only way to save money on property purchases. You can also take advantage of low rates and lock in low repayments, saving tens of thousands over the lifetime of a loan. If rates were to drop even further, this could fuel higher demand for property and increase property prices. And this isn’t necessarily a bad thing for prospective homeowners.
Since 2012, rates for mortgages have fallen significantly. On a 90-95% LTV mortgage, you could expect to pay around 6% in 2012, but this has now fallen to around 3%. On a 60% LTV mortgage, you may have paid around 4% in 2012 and would pay just 2% today.
For every £100,000 you borrow, at 6% interest with a 25-year team, your monthly cost would be around £650. At 3% interest, with the same term, your monthly payments would be closer to £478. This would save you over £2,000 per year.
Another attractive prospect for borrowers is the possibility to “lock-in” repayments at low rates. We are seeing more lenders offering 10-year fixed-term mortgages with a 5-year break clause. If you are nearing retirement and want to take advantage of low rates, this is a great way to fix your repayments over the next ten years.
If you aren’t already on the property ladder, or you are considering remortgaging in the next 12 months, you could consider a long fixed term. Since many lenders will offer a break clause, this is essentially a five-year fixed-term deal with the option to extend if you are still enjoying a great deal. Choosing a lending product that allows overpayments could enable you to take advantage of the low repayments and clear your mortgage faster than ever before.
If you’re considering remortgaging to a long fixed-term, it’s important to make sure you are getting the best possible deal. Our mortgage brokers can connect you with the best lenders for your situation. With access to all lenders, not just the high street names, you could enjoy significant savings over the lifetime of your mortgage.
