Re-mortgaging Down Due The Low Interest Rates

by Mark Johnston

The number of people re-mortgaging has slumped over the last couple of years, the main reason for this steep decline is the fact that many borrowers have actually been better off staying put as their lenders standard variable rate (SVR) was lower than the rates available on new mortgage products.

Even though the bank of England base rate has remained low the tide it would seem is turning as many standard variable rates (SVR) are on the rise and new mortgage rates have become more competitive s the funding crisis eases.

Borrowers who are paying their lenders standard variable rate (SVR) currently are being urged to consider re-mortgaging to one of hundreds of competitive deals now on the wider market; otherwise they face wasting thousands of pounds in interest over the next year alone.

Mortgage manager at moneysupermarket.com, Hannah Mercedes Skenfield suggested that” for many people now is the time to switch, particularly if they want to lock in to a fixed rate as the rates on this type of mortgage are not likely to get much lower”.

Re-mortgaging accounted for 37% of all lending during the first three months, up from 30% during the previous quarter. 

The bank of England figures showed that net mortgage lending fell by £69 million in May 2011. In June 2011 there was a net mortgage repayment of £100 million, bringing total gross lending secured on homes down to £11.2 billion. These figures indicate that borrowers are generally paying off mortgages faster and not loading themselves up with yet more mortgage debt.

The British Bankers Association (BBA) whose members account for two-thirds of all UK mortgage lenders, figures show they approved 21,519 re-mortgages in May 2011 however this was down on the average of 24,571 in the previous 6 months.

With speculation in the industry of the base rate being forced to rise over the next two years due to rising inflation, borrowers who need to stick to a monthly budget should opt for a low fixed rate mortgage deal. Those borrowers happy to take more of a risk may stick with the variable rate option in order to take advantage of lower monthly repayments in the short term. However once the base rate begins to rise repayments will increase so it is important to consider affordability.

Even when re-mortgaging it is important to remember that there will be legal and valuation costs to factor in when looking at deals, although these will be considerably lower than when buying a house.

Some lenders however do offer deals without fees when re-mortgaging. Therefore it may be cheaper in the long term to opt for one of these deals rather than go for a lower rate that does not offer a fee free deal.

Abby building society has unveiled a new mortgage option aimed at borrowers looking to re-mortgage, the 2 year fixed rate and tracker deals will help cut re-mortgaging fees by around £200.

The British Bankers Association (BBA) statistics director, David Dooks stated that “money is still tight and yet people are still continuing to pay off debt rather than save or borrow”.



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