Is it better to remortgage now? | WIS Mortgages
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15th September 2023

Is it better to remortgage now?

The UK's property market has always been a subject of interest and investment. For homeowners, one crucial decision often arises during the course of their mortgage term: whether to re-mortgage or not. Remortgaging refers to the process of switching from one mortgage deal to another, either with the same lender or a different one. As the financial landscape continues to evolve, the question of whether it is better to re-mortgage now in the UK becomes increasingly relevant. In this article, we will explore the factors to consider when contemplating a re-mortgage and how current market conditions influence the decision-making process.

Understanding Remortgaging

Before delving into the current market conditions, it's a good idea to understand the basics of remortgaging. Remortgaging allows homeowners to find a new mortgage deal that suits their current financial situation better. This can include securing a lower interest rate, changing the repayment term, or accessing equity for home improvements or debt consolidation. By doing so, homeowners aim to save money on their monthly repayments or achieve greater financial flexibility.

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Is it Better to Remortgage Now?

If you're in a position to remortgage, you might be wondering to yourself, 'is it better to remortgage now?'. The answer to this question will depend on a number of factors that are going to be unique to your circumstances. So, to help you make an informed decision, let's go over these important considerations:

Interest Rates and Economic Factors

One of the most significant factors influencing the decision to re-mortgage is the prevailing interest rates. Interest rates play a crucial role in determining the cost of borrowing, and even a slight difference in rates can lead to substantial savings over time. Therefore, homeowners should monitor the Bank of England's base rate and the broader economic conditions.

In a low-interest-rate environment, remortgaging can be particularly attractive. Homeowners who secured their mortgages when rates were higher may find it beneficial to switch to a new deal with a lower interest rate, potentially reducing their monthly payments and overall mortgage costs.

Market Competition Among Lenders

The competitiveness of the mortgage market is another vital aspect to consider. Lenders are continually vying for new customers, and this competition can lead to more attractive mortgage deals for borrowers. As a result, remortgaging in a highly competitive market might present borrowers with better options and potential cost savings.

It is advisable to shop around and compare offers from various lenders to identify the most suitable deal. However, it's essential to bear in mind that attractive deals may come with fees or other associated costs that should be factored into the decision-making process.

Changing Personal Financial Circumstances

A homeowner's personal financial circumstances can change over time. These changes may include a significant salary increase, career advancement, inheritance, or any other factors that positively impact their financial situation.

For those who experience a high net worth, remortgaging can be an opportunity to increase their mortgage repayments and pay off their loan faster. Some homeowners may even consider switching to a shorter mortgage term to become debt-free sooner, thereby saving on overall interest payments.

The Impact of Property Values

The state of the property market and changes in property values can significantly influence the decision to re-mortgage. If property values have increased since purchasing the home, homeowners may find themselves in a more favourable loan-to-value (LTV) ratio.

A lower LTV ratio generally leads to better mortgage deals, as lenders view borrowers with more equity in their properties as less risky. In such cases, remortgaging can unlock better interest rates and more favourable terms, ultimately reducing the cost of borrowing.

Evaluating the Costs of Remortgaging

While remortgaging can lead to potential cost savings and financial benefits, it's essential to carefully evaluate the associated costs of remortgaging. Re-mortgaging typically involves arrangement fees, valuation fees, legal fees, and potentially exit fees from the current mortgage deal.

Before proceeding with remortgaging, it's crucial to compare these costs against the potential long-term savings resulting from a new mortgage deal. In some cases, the costs may outweigh the benefits, making remortgaging a less attractive option.

Considering Future Changes in Circumstances

Life is unpredictable, and homeowners should consider their future plans before deciding to re-mortgage. If there are potential plans to move house in the near future, remortgaging may not be the most suitable choice. What's more, if there are any anticipated changes in employment status or other significant financial decisions, these should be factored into the decision-making process.

Is Remortgaging Right for You?

The decision of whether to re-mortgage in the UK depends on a variety of factors, including interest rates, market competition among lenders, personal financial circumstances, property values, and the associated costs of remortgaging. Homeowners must carefully assess their situation and consider the potential benefits and drawbacks of remortgaging before making a decision. Seeking advice from a financial advisor or mortgage broker can be invaluable in making an informed choice.

If you're unsure about whether or not remortgaging is right for you, then get in touch with our team at WIS Mortgages today for free advice and guidance. Or, use our affordability calculator to find out if remortgaging is a viable solution for your circumstances.

'Think carefully before securing other debts against your home or property'

As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments

Frequently Asked Questions

Q. What are the downsides of remortgaging?

A. Remortgaging isn't always the best option for you due to a number of reasons. The fees associated with remortgaging might negate the potential benefits you'd receive if you chose to remortgage. Also, the process of remortgaging takes a significant amount of time, so you'll need to be committed to the process to make sure it goes ahead.

Q. Is it worthwhile to remortgage every 2 years?

A. The right time to remortgage depends on your circumstances, so if you're on a two-year fixed-rate mortgage, then it's a necessity to remortgage every two years. If you don't, then you'll end up on the standard variable rate which may have higher interest rates attached.

Q. Is it better to remortgage after 2 or 5 years?

A. A 2-year fixed mortgage tends to offer a lower interest rate, but a 5-year mortgage will provide you with greater financial stability in the long run. So it really depends on what your ideal outcome is when deciding between these two types of remortgaging packages.

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