Do you have a Remortgage Strategy? If your remortgage is due this year, understandably you might be worried about what you should do next with your mortgage. Concerned about increased rate rises and how this will affect your monthly expenses? Unsure whether you should go for a fixed rate or hold your nerve and go on to a tracker mortgage?
If you are considering your next step for your mortgage, then this is the only strategy you need to ensure you get the best possible rate for your situation and help you make a decision – which can sometimes be the most daunting part!
The 2023 mortgage strategy – part 1
I’ve spent that last 6 months or so urging people to remortgage as early as possible. Most lenders allow you to lock in a new mortgage rate up to 6-7 months before your current rate ends. By doing this, you will be able to secure the best possible rate protecting you from further rate increases, because your new rate will be fixed in – hence the name ‘fixed rate mortgage’.
This advice hasn’t changed. But interest rates are reducing now so you could potentially be tempted to wait and not do anything until closer to the time you are due. However, this is a bad idea because if things suddenly go up again like they did in 2022, then you will kick yourself!
Here’s the best bit… part 2
If mortgage rates continue to come down and there’s a lower rate available, you can select a new one a few weeks before and not complete on the first one you chose 6 months earlier. And what’s even better is, there is no charge to do so. If rates do continue to rise, you’ll be very glad that you secured a rate when you did. It’s like having a mortgage safety net.
Currently, the Bank of England base rate is going up, to a fairly high level. However, fixed mortgage rates are coming down. The media would have you believe we’re all doomed but things have started to improve since ethe chaos that unfolded in October 2022. Mortgage fixed rates are not directly linked to Bank of England base rate, they are influenced by swap rates linked to different factors, such as the world economy, inflation, prices etc. These rates have reduced which is what we’ve seen of late. In simple terms, a swap rate is the rate at which Banks borrow money at from other sources. They then lend that money to the public at a higher rate and they make a profit on the repayment. These swap rates will have an interest rate for a certain amount length of time, just like mortgage rates. Right now, it’s cheaper for banks to borrow money for 5 years than it is 2 years, which is passed directly on to mortgage customers. Which is why a 5 year fixed rate is cheaper than a 2 year fixed rate.
We also need to touch on tracker mortgages too. A tracker mortgage does follow the Bank of England base rate. So, if the base rate goes up, so does your mortgage. Similarly, if the base rate drops, your mortgage rate will too – although this unlikely for the foreseeable future. A tracker mortgage is still a good option if you don’t want to fix and want the flexibility of being able to move or make other changes to your mortgage. This option will only work if you opt for a tracker mortgage with no tie in period, which some lenders do offer. This then gives you the freedom to come away from it and swap to a fixed rate if the base rate continues to rise or you need the longer-term security of consistent monthly repayments.
No one can tell you what to do – including your mortgage broker! It’s your Remortgage Strategy?
I can provide you with advice about your mortgage options depending on your individual circumstances and give you the figures for various possibilities but ultimately, I can’t tell you how long you should fix for! It all comes down to your attitude to risk and your future plans. But I can tell you that the mortgage strategy I’ve outlined here is the safest way you can navigate through your remortgage in 2023.
What do we know about the financial future?
The advice hasn’t changed. You should still do your mortgage 6 months in advance. Get this locked in and a backup plan secured. Then whatever happens you’ve got a rate fixed that won’t be affected by further increases. If mortgage rates continue to come down and there’s a lower rate available to you, the lender will allow you to swap and choose a new rate. If you don’t have a fall-back option and rates go up again, you could miss out on potentially hundreds of pounds each month. This strategy gets you the best of both worlds.
If you want to know what mortgage rates are available for you and what options, there are based on your individual circumstances then please talk to us or just general advice on your Remortgage Strategy, There is no charge for a chat. Call us on 0300 124 5630, WhatsApp us on 07359 189 763 or pop us an email hello@vantage-mortgages.co.uk
