Is it too late to remortgage?

At this moment in time UK base rates stand at 0.75% which is up from a low of 0.25% towards the end of 2016. Even though it appears unlikely that UK base rates will move significantly higher in the short term, just look at Brexit, there have been signs of late that short-term fixed mortgage rates are starting to creep higher. So, is it too late to remortgage, or are we still in a long-term low interest rate environment?

UK interest rates

If we look back to 1980 UK base rates topped 15% compared to the level today of 0.75%. While the 2008 US mortgage crash is obviously to blame for the worldwide economic downturn and current low interest rate environment, how long can this continue? Mark Carney, Governor of the Bank of England, has been highlighting Brexit concerns for some time but it is worth noting that he has made some significant errors in recent times. He has flip-flopped between interest rate rises and reductions on numerous occasions; signalled the incorrect direction to markets and it is fair to say he has lost some credibility. However, it is worth noting that we are currently in uncharted territory and there is no experience to fall back upon.

Mortgage rate trends

If we look at mortgage rates going back to 2007 we see a two-year fixed rate (75% LTV) of just over 5%. We see standard variable rates at 7% which looking back was the peak of the UK property market in recent times. Fast forward to the end of 2018 and two year fixed rates now stand at just under 2% with the standard variable rate fairly constant at around 4%. There has been a slight increase in the two-year fixed rate over recent months but in the overall context of remortgaging it is neither here nor there.

One interesting trend in 2018 saw 1.6 million borrowers in the UK switch mortgage products in-house with existing lenders or move to new lenders. Official figures show that 1.18 million homeowners remortgaged with in-house products worth a staggering £158.7 billion. There were also 420,000 homeowners who jumped ship to a new lender for more competitive rates. In summary, one in five homes in the UK was involved in some form of remortgaging activity.

Is it too late?

While experts believe that UK base rates are not necessarily moving higher in the short to medium term, we may see some movement in mortgage rates. It is fair to say that the mortgage sector is extremely competitive but tighter regulations have had an impact. The truth is that the only rate you can guarantee is the rate before you today. If this is a significant improvement on your current fixed-rate, and fees relating to issues such as early repayment will not be an issue, then it is worth taking advice on remortgaging.

There is the option to lock your mortgage rate for two years, five years and 10 years with varying rates depending upon the LTV. Again, it would be sensible to seek professional advice and take a look at your overall financial situation at the same time. There may be opportunities to increase collateral or you might have investment proposals to consider. Finance is relatively cheap at the moment but you should still consider any investment proposals, remortgaging and product switching very carefully.

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