The remortgage market has become increasingly competitive as borrowers regularly switch between lenders trying to get better deals. The CML reports that remortgaging accounted for £28.8 million, or 39 per cent of the market, in the first quarter of 2006.
After all, a mortgage deal isnt for life. Its simply an arrangement you have with a lender where you borrow the cash to pay for your home. If another lender subsequently offers you better terms, such as lending at a lower rate, then youd be a fool to refuse, wouldnt you?
However, thats exactly the situation that many of you are in. Some of you are paying out far more for your mortgage than you need to because you havent taken advantage of one of the many good deals around these days.
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Of course, not everyone is going to be better off remortgaging. If you’ve only recently set up your mortgage then you’ve probably already got a pretty good deal. That’s because the mortgage market has become much more competitive in recent times.
Nevertheless, remortgaging is a good way of escaping from high variable or fixed interest rates and taking advantage of some of the current fixed-rate or discounted mortgages which can have a much lower interest rate. For instance the current standard variable rate varies around 5-6 per cent but you can get three-year fixed rates at less than that, and even five-year fixes. And discounted rates and cashbacks can’t be ignored either.
Remortgaging can also benefit those on variable-rate mortgages who believe that interest rates are on the rise and want to fix their mortgages before this happens. While you may not save money immediately, you at least gain the security of knowing exactly what your monthly repayments will be in advance, for the period of the fix.
With interest rates rising and fixed rates still at competitive levels, not to mention lenders offering such attractive discounts and cashbacks, it may seem tempting to get rid of your existing mortgage as soon as possible and find a new lender, or a new mortgage with the same lender. But before taking out a new mortgage, make sure you know exactly what costs are involved and that it is worth your while going through the expense of remortgaging.
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Of course, such calculations can be simplistic. Depending on how quickly they respond to changes in general interest rates, mortgage lenders can sometimes offer a competitive rate and sometimes not. But if your lender has consistently had a higher rate than its rivals over a period of years, or has been one of the last to respond when the Chancellor has cut rates, then it could be time for a change.
Next: The next steps to remortgaging
