Since the onset of 2020, many homeowners and borrowers have been witnessing the rise and fall of the mortgage market. Some industry experts saw the downfall in the availability of high loan-to-value products and a sudden surge in the lower loan-to-value products. If you follow the practices of major lenders like Virgin Money, you will notice that the bigger mortgage lenders have so far hedged their risks by offering lesser money for the same properties.
Amidst such dramatic changes, it is natural for you to feel perplexed about the condition of your mortgage. Should you be looking for the best remortgage deals available with your mortgage broker? Or should you wait for some more time and observe the market?
Here is how you can frame your thinking around this and find a conclusive answer:
1. Changing Market Dynamics: Compare Mortgage Deals and Observe.
2020 is an important year for the UK mortgage market. This year, a large percentage of mortgage deals already operational in the market are coming to a closure. By the end of the year, several deals will reach their maturity.
In addition to this, the cost of borrowing has lowered for many lenders because of the changes in the economic environment. Several lenders are passing on this lower cost of borrowing to their customers. Hence, it would be quite logical to hunt the best remortgage rates in this market.
Research published by LMS suggests that borrowers who have exercised remortgage deals have witnessed their monthly payments go down by as much as GBP 200.
2. Long-Term Savings: Hedge Short-Term Turbulence with Long-Term Stability.
Many first-time borrowers have to go for a floating interest rate, which usually traces the movements in the interest rates offered by the Bank of England. While the interest rate on their mortgage and the bank is not always moving together, they correlate.
This means that, generally, first-time borrowers have a higher cost of borrowing since floating rates tend to be more volatile. Many lenders have gauged this need in the market and have introduced fixed-rate mortgages, which have a higher appeal in markets dominated by uncertainty.
Analysis conducted by Experian shows that if you compare remortgage rates and observe the savings of people who have a mortgage of at least GBP 150,000 and have recently remortgaged their deal to a fixed interest rate, you will observe savings of about GBP 5,000 projected for the next 24 months. And this includes the cost of remortgaging like origination and processing fee.
3. If You Are Facing Payment Difficulties, Searching for the Best Mortgage Deals with No Fees Can Help.
Financial Conduct Authority has given guidelines which state that people who are facing payment difficulties can contact their lender and expect some form of relaxation. However, no blanket policies have been introduced. If you find yourself in such a situation, you should consider a remortgage.
You would need a remortgage deal that gives you a moratorium period in the beginning or lets you pay just the simple interest during this period. This may increase the cost of borrowing in the long run, but it will help you manage your cashflows for the time being. All you will need is a trustworthy mortgage broker who can help you find suitable options, without charging you a hefty fee.
4. If You Plan to Stay in Your Home for a Long Time, a Remortgage Would Be a Good Option.
Just like the moratorium period available with the remortgage deals, the longer tenure can actually help you reduce your monthly outflow for the time being. As the tenure is increased, you can expect the market to recover along with your income levels. Many borrowers in the market are already considering this option. The average borrowing period in the UK has shifted from a fixed rate for two years to a fixed rate for five years.
In Conclusion
Taking into account the changing market environment, comparing it with your existing deal, and reaching a conclusion can be a very demanding task. And yet, there is no assurance that you will find a definitive answer. An easier way would be to have a mortgage broker and advisor like Zinga help you in the process. You do not have to pay any fees to the broker, you get access to a larger set of products, and you get an informed opinion on all your queries. Contact Zinga Mortgages today.
References:
- https://www.express.co.uk/finance/personalfinance/1337278/Mortgage-remortgaging-products-save-money
- https://www.eveningexpress.co.uk/news/business/home-owners-missing-out-on-deals-which-could-cut-their-mortgage-costs/
- https://www.northumberlandgazette.co.uk/read-this/2-and-5-year-fixed-rate-mortgage-deals-explained-and-how-choose-what-go-2891442