The start of a new year is a good time to take a critical look at your finances. Many people will have over-spent at Christmas, despite their best intentions. Also, their credit card balance may be higher than they would like. Others may have been meaning to look at their mortgage for a while, particularly those who have come to the end of a fixed or discounted rate and haven’t yet got round to moving onto a new deal. As, will those who want to move house this year but are worried about the potential of rising interest rates.
Rates on the rise
With the Bank of England raising the base rate in December, the first increase in three years. The borrowers on their lender’s standard variable rate (SVR)are likely to be paying more for their mortgage than is absolutely necessary. If you are in this position, it is time to shop around for another mortgage deal. The good news is that while mortgage rates have edged up from all-time lows of less than1 per cent last year. They are still extremely competitively priced. Lenders have plenty of money to lend and are keen to lend it, which is good news for borrowers.
Should you fix?
Fixed-rate mortgages, in particular, are attractive. Not only do rates start at less than 1.5 per cent for two- and five-year fixes, they give borrowers worried about rate rises protection from higher mortgage payments. With the rising cost of living and higher energy bills, budgeting is more important than ever, and it is reassuring to know that your mortgage costs are fixed every month.
Some lenders have been launching longer-term fixes to appeal to borrowers worried about rate rises but fixing for ten years or more needs careful consideration. Many of these mortgages have early repayment charges if you need to get out of the mortgage before the end of the fixed term and while, in theory, you may be able to port or take this deal with you when you move, there is no guarantee that this will be the case. The final decision lies with the lender and if it does not comfortable with the property you are buying, it can refuse.
A great time to remortgage
If you are on your lender’s SVR, you are likely to be paying more than you need to for your mortgage. It may suit you if you are close to paying it off so don’t wish to lock into another deal. But if that is not the case, now is the time to find another mortgage deal. There is little point in waiting around in the hope that mortgages will become cheaper again, as the cost of funding continues to rise.
Stay put – for now
If you are on a fixed or base-rate tracker which comes to an end this year. Make a note of the date and start looking at an alternative six months before then. Most mortgage offers last between three and six months, depending on the lender, and it is worth booking one in advance as interest rates could rise again. If you reserve a fixed rate, this won’t change even if interest rates rise. If they do, you will be pleased that you took the plunge.
The other advantage of booking a rate in advance is that remortgaging can take longer than you think. So, you avoid slipping onto your lender’s SVR while waiting to switch over to your new deal. This means you won’t see a big jump in your monthly mortgage payments.
Get in touch
The best way to find a new mortgage deal is to seek advice from a whole-of-market broker such as AWS Private Finance. We look at all the deals on the market to find the right one for your particular circumstances.
AWS have experience of working with the self-employed and contractors, who traditionally can find it difficult to get a mortgage. We also know which lenders offer more favorable terms to professionals. Including those who are starting out in their careers and are not earning as much now. We also have close relationships with the private banks. So, if you require a large mortgage, we can explore this option too. Get in touch for more information.
