Some economists are warning of interest rates of between 6-7% may be needed to beat soaring inflation. This ultimately gets passed on to mortgage rates and could potentially add £1,000s to repayments. If you are thinking of re-mortgaging to lock in lower rates, here are some things to consider.
Our CEO Luke Loveridge talked with Kelly Sjöberg to get her view on whether 2022 is a good time to re-mortgage. Part 2 focuses on what options there are for people, especially those who may be stuck on rates and those wanting to have longer term certainty.
Kelly has been a mortgage and protection adviser for 14 years and currently works as a business development manager at Smart Advice Financial Solutions who are a network partner of the Mortgage Advice Bureau.
When should I re-mortgage?
If your mortgage deal is coming to an end this year, you may well be able to find another favourable interest rate.
You may also find it beneficial to lock into a competitive fixed rate mortgage to avoid higher costs later on if interest rates rise. However, it may not be best to switch until your mortgage deal is coming to an end (in the next 3-6 months), or you could end up with expensive early repayment fees.
Mortgage calculators and mortgage advisors can help you find out how much money you could save on your re-mortgage payments by switching to a new mortgage deal.
Advantages of getting a fixed-rate mortgage
Given the uncertainty of the current economic outlook, moving on to a fixed rate mortgage may be better to lock in payments so you can plan ahead. Lenders may offer two or five year deals at a fixed rate, but some offer 10 years and longer (even up to 40 years!).
According to Moneyfacts the overall average two-year fixed rate has already increased by 0.14% in August and has now reached 4.09%. So fixing offers both security and peace of mind; especially if you are on a fixed income (like a pension).
However, there are both pros and cons to every mortgage option, it depends on your circumstances and up to you to weigh up all the factors and choose the best option for you.
What is a green mortgage and how would it benefit you?
A green mortgage is a mortgage specifically targeted for more energy efficient properties.
As an incentive to either buy a green property or even to renovate an existing one to make it greener, banks are offering lower interest rates, other incentives such as cash back, or helping your affordability so you can borrowing more. Nationwide, for example, are offering £500 cashback when buying a property with an Energy Performance Certificate rating of A, which is a very attractive incentive!
Since the rising cost of living in the UK, investing to make your home ‘Greener’ with high energy efficiency, may future proof your finances.
How to prepare before re-mortgaging
Start early. It is strongly advised that you plan your re-mortgage 3-6 month prior to your current contract ending, in order to avoid a high SVR (standard variable rate).
Speak to a mortgage broker for advice, especially if you have complicated circumstance or are self employed. You can get a quote here.
Get your finances in order (e.g. bank statements, pay slips, tax returns).
Find out how much you can afford to borrow, based on your current earnings and circumstances (a mortgage advisor can also help with this).
Get help to review the whole market to get the best deal for you.
Make sure you check for any early repayment charges or exit fees!
About Propflo: Propflo is a property transparency platform powered by machine learning (a form of artificial intelligence). It was founded by successful proptech entrepreneur Luke Loveridge and geospatial and risk data scientist Dr Daniel Moyo. The business has a strong advisory team including the CEO of Yopa and ex-Purplebricks MD, Verona Frankish, and Dr Mike Tipping – a world-leading AI expert. Its lead investor, Ying Tan, is also an industry expert having built and sold one of the largest specialist mortgage brokers in the country.
Propflo supports homeowners, sellers and buyers with property scores, insights and services with an AI-first product road map.
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