There are currently a variety of comments in the market suggesting that The Bank of England Base rate might double from an historically low 0.5% to 1% by the end of 2018.

Whilst predicting the future is a precarious business it is worth noting that The Base Rate has been rumbling along at next to nothing for a decade now and at some point rises are inevitable.

With many borrowers on fixed interest rates that are due to mature this year and next it is certainly worth considering your options now, before all lenders remove their best deals from the market. Many borrowers will be on low ‘teaser’ rates but a lender’s SVR (Standard Variable Rate) currently averaging at about 4.75%, with some lender’s SVRs as high as 5.99%!

With initial 18 month fixed rates still available at around 1% at the time of writing, consideration of your remortgage options now would be prudent.

Here are a few ideas to consider;

  • Consider overpaying capital repayments now. Many lenders will let you pay up to 10% in overpayments each year and whilst interest rates are low taking advantage and repaying outstanding debt makes sense.
  • Consider remortgaging. This might mean incurring charges for a remortgage and penalty charges for early repayment but with a wide variance between fixed rates still on offer and the SVR you might be paying on reversion, this option is still worthy of consideration.
  • Reduce your Loan to Value by paying off debt. Effectively, you are introducing a larger deposit. If you can reduce your Loan to Value from 90% to 80%, or even 75% your borrowing costs will reduce considerably. Even a small saving on the interest rate you pay can run into thousands of pounds when compounded over the lifetime of the average mortgage.
  • Consider offsetting savings against your secured debt (mortgage). Once very popular, especially amongst the self-employed, offsetting allows you to reduce the day to day cost of borrowing and increase the actual interest rate on cash savings by linking your savings to your mortgage and thus reducing your interest charges. If you have spare cash producing small annual returns, the offset option should be seriously considered.
  • If you intend to borrow to improve your property, or move home, borrowing whilst there are still low interest deals available will help with affordability criteria. If you do this, make sure your own budget allows for any increases in interest charges after any fixed rate period you can secure. Ideally 5 years fixed would give you some stability, although lower 2 year deals are likely to be available.

When considering options here make sure you allow for the whole cost including redemption, penalty and arrangement charges and associated professional fees. This is sometimes difficult to do which is why we use software to ‘crunch the numbers’ on your behalf and best advise on the most cost-effective option for 2018 and beyond.

For more information contact us or speak to a mortgage adviser on 01628 507477.

Download our Free First Time Buyers Guide

Recent posts

The Financial Conduct Authority (FCA) has shared new changes to mortgage rules with the aim to simplify remortgaging, and encourage competition within the mortgage market.

Lloyds Banking Group has jumped on the bandwagon to boost lending for first-time buyers as they allocate an additional £4 billion to help first-time buyers on to the property ladder.

As the Loan to Income (LTI) cap has been increased to 5.5 times income, applicants who fit the First Time Buyer Boost criteria could borrow up to 22% more. 

The government is introducing mortgage reforms to boost homeownership, stimulate economic growth, and make the housing market more accessible, especially for first-time buyers.

Chancellor Rachel Reeves has announced the most significant mortgage reforms in over a decade—great news for those dreaming of homeownership.

Nationwide ease their ‘Helping Hand’ mortgage designed to help first-time buyers get onto the property ladder by allowing them to borrow up to six times their income.

 

Keeping the kids entertained over the six-week summer holidays isn’t always easy, especially with the cost-of-living making it even more difficult. Below is a list of fun, inexpensive ideas to do over the break

The Financial Conduct Authority (FCA) has published a discussion paper about the future of the mortgage market in a bid to improve access for first -time buyers, self-employed, and those borrowing in retirement.

Ever wondered where the most reasonably-priced towns for families to buy are? Property company, Zoopla has identified the top 10 towns for families to live in the UK by looking at the most affordable towns, and how many people are looking in that area.

There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.