If you’ve still got a few months before your current mortgage deal finishes, and you’re hoping interest rates might fall in 2024, you might feel like there’s no big rush to remortgage.
However, with no guarantees where interest rates will head next, and mortgage rates currently more competitive than they’ve been for some time, you might be better off starting your search for a new deal sooner rather than later.
Most lenders allow you to secure your next mortgage deal up to six months before your current deal finishes, enabling you to roll straight over onto your new rate when your deal ends.
We’ve put together this guide to explain why this could end up saving you a significant amount, and when it’s the best time to start looking for a new mortgage deal.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
Should I remortgage if my current deal is ending?
If you’re currently on a mortgage deal, you’ll usually move automatically onto your lender’s Standard Variable Rate (SVR) once this ends.
This could see you paying hundreds, if not thousands more in interest than you have been so far, as SVRs are usually much higher than the rate you were paying on your introductory deal.
According to financial website Moneyfacts.co.uk, the average SVR is currently 8.19% (nearly double the 4.40% it stood at in December 2021), while the Bank of England base rate is 5.25% and the best two-year fixed mortgage deals are around 4.59% (although you’ll need a large chunk of equity to secure this rate).
That means that someone with a £150,000 repayment mortgage with 15 years left to run who is borrowing 60% of their property value would be paying £1,450 a month if they were on the typical SVR of 8.19%. Their monthly payments would fall to £1,154 a month if they remortgaged to a best buy two-year fixed mortgage rate of 4.59% – a saving of £296 a month or £3,552 a year.
If you want to roll over from one deal to another to avoid moving onto your lender’s SVR, you will probably want to get serious about applying for a new mortgage a few months before your current deal ends. This way, you will have time to shop around, complete your mortgage application and set things up so that your new mortgage begins when the deal on your current one finishes.
Teddy Cenaj, mortgages expert at Habito said: “The best time to look at starting your remortgage is six months before your fixed rate comes to an end, the reason being that you can get the application started and have your offer in nice and early so you don’t have to worry or rush to get things sorted.
“The best thing about starting it early is it gives you time to watch the market. If rates go down during that period then as long as it makes financial sense you could look to switch to the lower rate. However, if rates go up then you already have an offer secured at the lower rate.”
Other reasons to remortgage
Of course, you don’t necessarily need to wait until your current deal is ending to remortgage. There might still be a better deal than your current one on the market, particularly if it’s been a while since you looked.
This could be especially true if you’ve paid off a good amount of your current mortgage already. This would mean that you have a larger chunk of equity in your property which could give you access to better deals than before, as lenders will consider you less of a risk.
If your property has increased in value since you bought it – say, because of improvements you’ve made, or because prices in the area have risen in general – then this will make your equity in the property more valuable as well, which could also help your odds of getting a better deal.
However, if you are planning on leaving your existing deal before it finishes, make sure you check exactly how much you’ll have to pay in early redemption penalties. If these are likely to add up to thousands of pounds, this could well outweigh the benefits of moving to a better deal, so you’ll need to crunch your numbers carefully, or ask a mortgage broker to do this on your behalf.
Read our articles Five good reasons to remortgage right now for more information on why the current climate might be the perfect time to remortgage.
You can also use this tool to compare the best remortgage deals at the moment.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
Will I definitely be able to remortgage?
Many people in their 50s, 60s and beyond stay on their lender’s SVR because they assume they might be too old to remortgage. However, there’s no reason why age should be a barrier to you getting a standard mortgage, and as long as you can demonstrate that you can afford the monthly repayments, you should still be eligible for mortgage products from several banks and building societies. Find out more in our guide Mortgages for over 50s: what you need to know.
You may also want to consider other options such as a retirement interest-only mortgage or a lifetime mortgage. With a retirement interest-only mortgage, you only pay off the interest on the loan each month, rather than any of the capital itself. The capital is only repaid when you either die or move into long-term care and the property is sold. You can find out more in our article How retirement interest-only mortgages work.
Another option is a lifetime mortgage, a type of equity release plan, where both the interest and capital are paid back when you either die or move into long-term care. Learn more about lifetime mortgages in our guide Lifetime mortgages explained and about how lifetime mortgages and retirement interest-only mortgages compare in our article What’s the difference between a lifetime mortgage and a retirement interest-only mortgage?
If you want to see how much a lifetime mortgage is likely to cost you based on your individual circumstances, our lifetime mortgage calculator can crunch the numbers on your behalf.
You must seek professional advice before you can apply for a lifetime mortgage. You can find an equity release advisor via the Equity Release Council’s (the trade body for the equity release sector) website here. Find out more about equity release in our guide Equity release: What is it and how does it work?
If you’re looking for somewhere to start, you can get expert advice from an independent equity release specialist with Unbiased. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
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