buyabetterhome.co.uk
Latest Articles
- Asking Prices Drop by 3.1% 02/12/11
- How to Solve a Housing Crisis 21/11/11
- House Prices Up in October 11/11/11
- A Future Generation of OAP Mortgagees 30/10/11
- Letting Agents Become the Villains 25/10/11
- Shelter: Private Rents Unaffordable 18/10/11
- 2011: A year of Stagnated House Prices 09/10/11
- Households Facing Fuel Poverty 01/10/11
- The Scourge of ‘Shameful Shoebox Homes’ 20/09/11
- Is it the Worst Time Ever for First-Time Buyers? 13/09/11
- Slight Dip in House Prices in August 04/09/11
- Property Sales Boost for July 30/08/11
- House Prices to Rise 14% by 2015 23/08/11
- A Negative Equity Boom 14/08/11
- How to Bag a Property Bargain 07/08/11
- Housing Market Remains Inactive 31/07/11
- Asking Prices Cut For the First Time in 2011 25/07/11
- The Price of Renting Continues to Rise 17/07/11
- Halifax: Housing Market “Significant Headwinds” 10/07/11
- Mortgage Rates at a 23 Year Low 28/06/11
- The Mortgage ‘Prisoners’ 19/06/11
- Fixed-Rate Mortgages Discounted to Tempt Borrowers 31/05/11
- Repossessions on the Rise 17/05/11
- House Prices Fall in April 10/05/11
- Cash Buyers Controlling the Housing Market 07/05/11
- Mortgage Lending Rebound in March 24/04/11
- The base rate and remortgaging 18/04/11
- Who Does the Best House Price Survey? 12/04/11
- Nationwide Report House Prices on the Up 04/04/11
- Councils Pioneer Scheme to Help First-Time Buyers 23/03/11
How to Remortgage in a Difficult Market
Recent figures from the Bank of England and the Council of Mortgage Lenders (CML) reveal that the number of remortgages taken out has fallen 14% from April to May this year. Over 12 months the figure is more marked; down 23% since May 2007. Although remortgaging is the best way to save several hundred pounds per year, these figures are hardly surprising; in the current climate, so many mortgage products have been withdrawn, there is no longer much out there to tempt the homeowner into switching. Many borrowers are opting to stay with their existing lender at the end of the initial fixed period, even if this means a substantial hike in monthly payments on the lender’s standard variable rate (SVR).
The banks’ attitude towards the remortgage market is somewhat mixed. Woolwich and Nationwide have announced that they will be cutting the price of their fixed and tracker deals but the likes of Alliance and Leicester, HBOS and Abbey stated that they would be changing the terms of their lending to reflect rising household bills. Presumably this means that their calculations will reflect less disposable income for prospective borrowers and therefore freezing out even more potential customers. HSBC have announced a rate of 4.99% but the fee of £2,499 means that most are better off on a loan with a higher interest rate and a lower fee. According to Moneysupermarket.com, HSBC’s 5.49% deal will work out cheaper for all mortgages apart from those between £212,000 and £250,000.
The advice for borrowers approaching the end of a fixed rate period is to plan ahead well in advance. You should start looking for a new deal at least three to six months in advance. It is possible to “reserve” a rate with some lenders for up to six months in advance. If you can’t find, or are simply not eligible for a competitive rate loan elsewhere then staying with your current lender and moving to their SVR may not be the end of the world. Some SVRs are looking quite competitive in the current market, in comparison to some fixed rates.
Remember also that the SVR is not a forgone conclusion. Talk to your current lender; they may play ball and put you onto another competitive rate - rather than lose your custom. Above all, don’t panic; there are no penalties for switching away from your mortgage once you’ve exited the fixed “honeymoon” period, so you can always remortgage later when conditions are more favourable. Having just said that - watch out for mortgages that tie you into an Early Redemption Charge (ERC) after the fixed rate has finished. An example of this underhand trick is the Norwich & Peterborough Building Society who are now trying to tie you in for a couple of extra years after the discount period. Move early and face a penalty of 5% of the outstanding balance.
If you have savings, it could be an option to use them to create more equity in your property by paying off a chunk of the current home loan. This will give you a better loan-to-value ratio and increase the number of mortgage products available at more competitive rates.