It is extremely easy to sit back once you have agreed a mortgage and acquired a property. Initially, when looking to secure the original mortgage capital you will likely look around for the best short, medium and long-term deals. You will probably have been attracted by relatively low introductory offers and certainly taken advantage of these. However, do you monitor the market to check for better deals on offer? Once your introductory period is over how competitive is the valuable interest rate?
Whether acquiring a property to live in or investment property there is no doubt that cash flow is extremely important. There are ways a means of minimising your mortgage payments one of which is to take advantage of fixed rates and/or tracker arrangements. Even though UK base rates are near historic lows, and likely to remain there for some time to come, there will come a time when base rates begin to rise. At this point a number of the more attractive fixed rates will be removed from the market and mortgage rates will likely be stepped up to the next level. At this point it will be too late to lock in a relatively low rate!
How often should you remortgage?
Many people are concerned that switching mortgage providers on a regular basis will impact their credit rating. The fact is that those on fixed rates will likely be so for anywhere between three years and five years. As a consequence, moving mortgage provider (or simply switching mortgages with your current provider) after a fixed term is a perfectly legitimate exercise.
As we alluded to, many people will look to remortgage with other mortgage providers. In reality, if you approach your current mortgage provider the majority will do their best to match other rates in the market. In many cases it is easier, and cheaper, for them to trim a current mortgage client’s rate rather than lose them and incur the cost of attracting new customers.
Planning in advance
While there are no hard and fast rules regarding remortgaging, many advisers suggest researching rates anywhere from three months before the end of your current deal. This allows you time to check the market, do your research and ultimately put in place the paperwork required as your current mortgage incentive period comes to an end. This is also relevant when looking to remortgage with your current mortgage provider as it allows scope for negotiation and matching deals on offer elsewhere.
Those who leave remortgaging until the very last minute will likely suffer a period of increased mortgage rates while a new agreement is put in place. When you consider that some high street banks can take up to 6 weeks to process mortgage application paperwork, it pays to plan ahead.
If you speak to 10 different experts regarding mortgage interest rates you will get an array of different answers and suggestions about the short, medium and long-term direction of rates. In reality, the only certainty is the rate in front of you today. If it seems competitive and fits in with your financial scenario then it is probably worth investigating further. Trying to double guess the direction of short, medium and long-term interest rates is a dangerous pastime. After all, who would have guessed that more than a decade after the US mortgage crisis, UK base rates are still just a touch above their historic low?