2020 has certainly been a year of uncertainty, so there will be many people questioning if this is a good time to remortgage or not.
However, if your mortgage is due for renewal then despite the current climate, it could still be a great time to remortgage and save money.
Over the last year or so, the Bank of England base rate had slowly been creeping up from 0.25% up to 0.75%. This has gradually been making mortgages that little bit more expensive. However because of the spread of the global pandemic the base rate dropped in March to a record low of just 0.10% which could see many mortgage payments decrease.
Are you on a Standard Variable Rate?
Many homeowners are on their lender’s Standard Variable Rate (SVR). You would typically be moved onto this deal if you have been on a fixed rate or other deal that has now come to an end. If you’re on this type of deal your mortgage payments are likely to fluctuate with changes in the base rate. They may be lower now due to the recent cuts but if the rate rises again, then so will your payments.
Are you on a fixed rate deal?
Being on a fixed rate deal works for many people as it keeps your payments at a set level. You know exactly what you’ll be paying each month and can budget around this. It also protects you from any fluctuations in the base rate. If you are currently locked into a deal, this doesn’t mean it’s not a good time to remortgage. You’d just need to weigh up the pros and cons of doing so.
If you are currently on a fixed rate mortgage, it is likely that you’ll incur exit fees if you decide to leave the deal early. The earlier you are into the deal, the higher the fees are likely to be. Check your terms and conditions to find out exactly what the charges are.
Hefty penalty charges could negate any savings you make on the new mortgage.
However, if the new deal is at a significantly lower rate than you’re currently on, and you are able to make a huge saving, it may still be worth remortgaging even with a fee. It’s important to work out the overall cost of the mortgage plus any fees over the whole term of the mortgage.
So should I remortgage now?
With the Bank of England base rate so low due to emergency coronavirus measures, then now could be a good time to remortgage.
Yes, there is still plenty of financial uncertainty. One of the biggest worries is the employment market. Many people are still on furlough payments and others are worried whether or not their job will be safe in the long term.
By remortgaging now, with the base rate so low, you could choose a fixed term deal. Many fixed rates are currently lower than most lenders’ SVR.
This will give you peace of mind knowing exactly what your payments will be for a fixed period. This could be from a year up to five or ten years. Do your research on what’s available and the amount of flexibility you want.
If you are struggling with your mortgage payments, or worried about future affordability, then please speak to your lender. Many lenders are currently offering mortgage holidays which could give you a break on your current payments whilst you are temporarily on furlough or seeking employment.
Some of the current low deals may not be around for long, so if your mortgage deal is currently coming to an end you may want to think about remortgaging onto a better rate. It can take several weeks to process a remortgage deal so if you have seen some great deals around now, it’s definitely a good time to start the ball rolling so you don’t miss out on any potential savings.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.