It’s the big question on all homeowners’ lips.
Mortgage interest rates have soared to record heights over the last 12 months. And following the Bank of England’s (BoE) announcement earlier this month, the outlook is still pretty bleak.
In an effort to lower inflation, the base interest rate has been increased (again!) from 3.5% to 4% – which is the highest it’s been since the recession in 2008. As a result, millions of mortgage holders up and down the country are understandably concerned.
This latest hike will have a direct impact on borrowing rates and monthly repayments. In fact, on average, it’s predicted it could set you back an extra £250 per month by the end of the year. Not a negligible amount by anyone’s standards!
So, if you’re nearing the end of your fixed rate deal, what’s the savvy decision? Should you remortgage now? Or wait, and hope that interest rates start to improve?
Remortgaging in 2023 – the definition of a dilemma
If your current fixed rate deal is due to end in the next 3-6 months, ultimately, you have two options:
1. Lock in another fixed rate
Of course, fixed rate deals are still available – but be prepared for a huge difference in your monthly repayments. The exact rate will vary depending on the lender, your affordability and credit score, and the loan to value ratio of your mortgage. But most are currently hovering around the 6% mark.
It’s a far cry from the 2% interest rate you’re likely used to.
Fixed rates have, indeed, dropped slightly in recent months. Which means, you’re likely to get a better rate today than you would have during the October and November high of 2022.
However, it’s important to bear in mind, these rates are still significantly higher than they were a few years ago. Your monthly payments will almost certainly increase. And once you’ve committed to those rates, you’re locked in for 2-5 years – even if fixed rates decrease further in the near future.
2. Revert to a standard variable rate
Your second option is to grin and bear the lender’s standard variable rate (SVR).
The BoE has predicted that inflation will continue to fall over the first half of 2023. In theory, this should start to have a positive impact on mortgage rates – and it could potentially be worth holding fire and seeing how the market unfolds.
Keep in mind, though, that the average SVR is currently around 7%.
This is the highest it’s been in over a decade, and whilst a reduction in rates is widely expected, there’s no guarantee. Nobody can say for sure what will happen over the next few years.
At least in the short term, rates are likely to rise further – as the BoE attempts to gain control of inflation. What isn’t clear is how long they’ll stay high. Some suggest they could peak in the second half of 2024, whilst others believe they could hover around 5% for up to 5 years. And at that rate, sticking on an SVR for too long could have serious financial consequences.
Which is the right decision for me?
Honestly, this isn’t for us to say.
It’s an incredibly tough call and everyone’s circumstances are different.
By signing up for a new fixed deal now, you could save money in the short-term – but you also risk locking into a relatively high interest rate that may be uncompetitive by spring.
By reverting to your lender’s SVR and waiting things out, there’s a chance you could secure a better fixed deal in a few months’ time. However, you will be out of pocket initially, and there’s a risk that rates will continue to rise – leaving you in an even worse position.
It’s a real dilemma and the right decision for you boils down to two questions:
- How much do you value the certainty of a fixed deal?
- How much of a gamble are you willing to take with a cornerstone of your finances?
The most important thing is to ensure your mortgage remains as affordable as possible, both at present and over the coming months and years.
There’s no getting away from the fact, interest rates are higher than they have been for many years – making it more important than ever to hunt down the right deal. So be sure to consider your options carefully and always do a thorough comparison of lenders to ensure you’re getting the best remortgage rates.
Contact our remortgaging solicitors today
Remortgaging in 2023 is, undeniably, a very big decision. And unfortunately, at St Helens Law, we’re unable to offer any direct advice on whether you should remortgage now or wait.
However, if you’ve already done your research and feel that remortgaging is the right option for you, we can certainly assist and guide you through the full legal process.
Our specialist remortgaging solicitors have unrivalled knowledge and experience in this area of residential conveyancing. Our rates are competitive and transparent, minimising impact on your finances during this difficult time. And we’ll ensure the switch to your new provider is completed as quickly, conveniently and affordably as possible.
We also offer an initial consultation completely free of charge.
So, if you have any questions about remortgaging or would like a quote, please don’t hesitate to get in touch. You can reach out to us via our online enquiry form, and we’ll get back to you with the next steps. Or if you prefer, you’re welcome to call us at any time on 01744 742360.