Remortgage 6 months ahead to beat rate rises

The Bank of England has increased the base rate in its last two Monetary Policy Committee (MPC) meetings. This was the first time this has happened since 2004 and further increases are expected this year to try and tackle inflation.

With interest rates on the rise, it’s smart to start considering how your mortgage payments could be affected – and what you can do to save money. You might be able to switch mortgage deals to save, but when should you start looking for a new deal?

Is your mortgage affected by the base rate?

The first question to ask yourself is if your mortgage repayments are affected by the Bank of England’s base rate. Base Rate Tracker mortgages and Standard Variable Rate (SVR) mortgages will certainly be affected by the base rate increase, causing your repayments to go up. Many other mortgage products can also be affected, but the degree of effect will be determined by individual lenders.

The only homeowners shielded from inflated mortgage repayments are those on a Fixed-Rate mortgage. However, these mortgage products don’t last forever and typically switch to an SVR mortgage once their fixed period ends. If your fixed period expires soon, you may also want to start thinking about your options today.

But how soon isn’t soon enough?

The normal practice is to start looking for a new mortgage around three or four months before your current deal expires. This is because your existing will only start offering a new deal around three or four months before the existing deal expires.

But due to increasing interest rates, you might be more eager than usual to pick up a better deal early. So, the question remains – how early can you remortgage to try and save money in the current climate?

The answer is six months because new mortgage offers with a new current deal can last up to six months. So, if your existing mortgage deal ends in October 2022, you could start looking for a new deal already.

The price of waiting

Searching for a new mortgage may not be the most appealing task and you may decide to put it off for a month or three. However, if you put off securing a new mortgage deal you could end up paying more due to forecasted increasing interest rates in 2022. If your deal expires in October, the closer we get to October before finding a new deal the less you’re likely to save.

And if you don’t want to go searching yourself, there are always mortgage brokers to help you find the best deals.

Can you remortgage to save money?

You may want to consider remortgaging to a fixed-rate deal or another mortgage type to try and save money. But it’s best to speak with a professional mortgage advice company or mortgage brokers for an individual assessment. It might not be worth switching for some people, depending on the terms of their current deal.

Euxton Mortgage Market can assist anyone considering remortgaging to avoid being (significantly) affected by the recent and projected base rate increases. Get in touch with us today for personalised support and advice.

Work on your credit score

If you’re going to remortgage or just considering remortgaging, you should try to improve your credit score beforehand. This will help you to remortgage and secure you a better deal. Some of the best ways to improve your credit score are to repay debts, close unused accounts and make sure you are on the electoral roll.  

Consider making mortgage overpayments

Another way to limit the effects of any future base rate increase on mortgage repayments is to make overpayments while interest rates are lower – if possible. Most mortgage products allow you to over-repay some of your loan each year. Doing this now will reduce your mortgage balance, which will then mitigate the costs of rising interest rates.

May 2022