Is The Economic Situation Making It The Right Time For a Remortgage?
If you are a saver than the last couple of years will have been pretty tough. However, for the millions of borrowers in the UK, record low interest rates have meant that many people have benefited from low mortgage repayments.
Considering there are many more borrowers than savers in the UK, it has been a good period for both businesses and individuals. However, interest rates may be set to rise in the near future, resulting in payment increases for millions of borrowers.
The Bank of England base rate currently sits at just half a percent, where it has been for some time due to the economic climate of recent years. However, as inflation is at its highest level in many years, the interest rates will need to be increased in order to avoid any further inflationary rises.
What is important about this is that the base rates of the banks follow the Bank of England base rate, so if we see an increase in the base rate, the banks rates will follow suit. So if you are on a standard variable rate mortgage product for example, your interest rates would increase with the base rate.
Early in 2011, a potential rise in the base rate was discussed by the Bank of England, however it was agreed that the 0.5% base rate should be kept at the time, however it has now been confirmed that increases will be made by the end of the year.
Most experts expect interest rates to creep up rather than rise sharply. Rates may rise to around one per cent by the end of 2011 before returning to levels of around 3-4 per cent in the medium term. In terms of the rates available on the High Street, these are likely to rise to around 5-6 per cent. So, now might well be the perfect time to consider that remortgage.
Another reason why it may be time to start shopping around for a remortgage is due to the banks finally relaxing some of their lending criteria. Since the ‘credit crunch’, banks have tightened their lending criteria making it more and more difficult to be agreed for a home loan. For two years banks have been extremely risk averse although there are signs that this is starting to change.
According to various sources, since February 2011, there has been an increase of one fifth on remortgage lending, so it is advisable to take advantage of the increased lending before interest rates go up, so that you can make the most of the lowest deals available on the market while rates are still relatively low.
If you are considering a remortgage to raise capital to invest in your new business then now could be the ideal time to approach a lender. Low cost bank loans are still notoriously difficult to obtain and so borrowing the money against your main residence may be a useful and low cost alternative.
So the answer really is yes. Now is a good time to remortgage before interest rates are hiked. This can help you to avoid paying unnecessarily high levels of interest on your mortgage now and in the years to come. Make sure you shop around, as the market place is extremely competitive, and get advice if you’re unsure about any part of the remortgage process.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.