Should I fix now or wait until my remortgage is due?
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The last few months have seen some real uncertainty in the mortgage market. After having stable interest rates for so long, we’ve now seen rapid rises and predictions of further hikes to come. A lot of clients are asking whether to exit their mortgage early and fix a rate now, so let’s look at the pros and cons.
Should I fix my mortgage now?
As with almost every mortgage question, there’s no simple answer, and it’s best to seek advice for your specific situation. Everyone’s circumstances are slightly different.
You can certainly explore your options, though. The first place to start is by looking at the details of your mortgage. How far into your fixed rate deal are you? When does it end? Does it have an early repayment charge and how much is it?
Is now the best time?
If your current fixed rate deal is due to end in the next six or seven months, then now is the perfect time to look at remortgaging. With most lenders, a mortgage offer lasts six months, so you could secure a new deal at today’s rates and book it in for when your fixed deal ends.
This is a great way to protect against future rises. Plus, if rates were to fall in the next six months, you’re not tied in and could find a better rate at a later time.
But if you would face an early repayment penalty to exit your deal, it may not be worth switching. An early repayment charge is often a percentage of the total mortgage, and can run into several thousand pounds.
How long should I fix for?
Fixed rate deals are usually available over two, three, five or ten years. Which to go for will depend on the deals that are the most competitive for you, and what your future plans are. Not many of us know for sure that we will stay in the same house for the next ten years, for example.
A mortgage advisor will help you explore the rates available and decide what’s the most suitable option. Generally, fixed rate deals are fairly expensive at the moment so it may not be worth exiting your current deal.
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When is it worth remortgaging?
The main times we generally recommend remortgaging are:
- If your current fixed or tracker deal is due to end in the next 6 months
- If you want to change key features of your mortgage
- If you want to borrow more
- If the deal you’re on is not competitive
Right now, people are worried about what will happen to interest rates and whether they need to take action to protect against further increases. But will it actually be worth leaving a nice, low rate early, and potentially paying an exit fee?
Are interest rates likely to rise?
At the moment, predictions are that rates will continue to rise as the Bank of England attempts to gain control of inflation. But what isn’t clear is how long rates will stay high.
The Office for Budget Responsibility said in November 2022 that it expects interest rates to peak in the second half of 2024, and then begin to reduce. But other market views suggest that interest rates may stay around 5% for around five years.
Nobody can predict for certain what will happen. What’s important, more than anything, is that your mortgage remains affordable in the months and years to come.
How can I find the right option for me?
The rates available depend on your specific situation – your affordability, your credit score and the Loan to Value ratio of your mortgage. To find the best deals for your situation, and explore what options might work best for you, talk to a broker like TMC Nottinghamshire.
We’re here to look at your current deal, when it ends and what’s available from our panel of lenders. We’ll provide tailored advice for your specific situation.
Can I keep my mortgage options open?
There are ways to wait and see what happens with mortgages. As mentioned above, if your mortgage is due to end in six months or less, you can lock in a deal now and decide later.
Some clients have been finding recently that tracker rate mortgages offer the best value. These are variable mortgages, so your monthly payments could increase over time, but they can offer a big saving against fixed deals. They have no exit fee either, so you can leave and opt for a fixed rate at any time.
There are lots of things to consider, so why not come in for a chat with us and see what could work best for you and your home.