Homeowners in the UK are questioning whether or not they should remortgage their house after the property market has gone into turmoil. Hundreds of mortgage deals have vanished from the market in recent days following Chancellor Kwasi Kwarteng's mini budget on Friday (September 23).
Following fears that the Bank of England could raise interest rates by another 0.75 percent, many mortgage lenders have withdrawn their current deals. According to analysis by Moneyfacts.co.uk, 3,961 residential mortgage products were available on Friday but by today (September 27) this has plummeted to 3,596 deals, analysis for the PA news agency found.
There are also concerns that mortgage repayments could rise by another £100 a month by Friday with rates predicted to go beyond 6 percent in the first half of 2023 if the Bank of England takes immediate action to save the pound. On Monday (September 26) the pound dropped to a record low, falling by more than 4 percent to just 1.0327 dollars in early Asia trade, before regaining some ground to about 1.07 dollars by the evening.
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Analysis of Google search data has now revealed that searches for ‘should I remortgage' have skyrocketed in the UK as of September 26 with many homeowners wondering how best they can protect themselves against rate rises.
The analysis by finance experts Loan Corp said that searches for 'remortgage’ exploded to just over double the average volume within the past week. The data also revealed that searches for ‘mortgage help' have gone up by 201 percent in the past week.
Myles Robinson, co-founder of Loan Corp, said: "The best time to remortgage is when you would end up in a better financial position as a result of that switch. There is not any point in changing mortgages just for the sake of it, especially during this uncertain time.
"We recommend remortgaging when; your fixed-rate deal is coming to an end, interest rates are on the rise and you're worried about missing out on a good deal, when you want to overpay and your lender won't allow you to do so, or if you've built up a lot of equity in your home.
"It is also important to remember that if you are looking to remortgage before the end of your current deal you will most likely have to pay an early repayment charge, so you should weigh up whether it is worth making that move."
Discussing whether or not homeowners should remortgage their house, Jonathan Samuels, CEO of Octane Capital, said: "This volatility has caused many lenders to have to rethink with regard to what products they can offer and at what rates they can offer them.
"It’s important to note that there remains a high level of mortgage products available to buyers, just shy of 3,600, and so the latest reductions are certainly no reason to panic.
"What is extremely important to realise is that a mortgage deal is not a mortgage offer and so homebuyers shouldn’t panic if they’ve already had a mortgage offer agreed. That said, a lender does have the right to withdraw this offer at any time, right up until the property purchase has completed."
Almas Uddin, founding director of Revolution Brokers advised: "Rates are still relatively low compared to historic highs and so those on a variable rate mortgage are well advised to consider moving to a fix rate product sooner rather than later.
"Rates are only going to increase in the foreseeable future and so locking in a three to five year term now will certainly save you money in the long run, but it’s also important to consider that you may be subject to exit costs or early repayment fees if you haven’t reached the end of your current term.
"If you meet your lenders eligibility criteria you may also be able to extend, or reduce your current term to help protect you over the next 18 months which is sure to be a turbulent time.
"But of course, there are drawbacks. You will be treated as a new applicant with regard to your mortgage eligibility so don’t assume you will be able to borrow to the same extent and across the same range of products."
David Beard, personal finance expert and CEO of Lendingexpert.co.uk explained why its not always best to remortgage now.
"The difficulty is that without a crystal ball, it's hard to tell how quickly interest rates will rise and where we'll be in 6-12 months, and mortgage deals and products are rapidly disappearing off the market. Unfortunately, even if you want to remortgage now, many of the cheapest deals are gone, and the deals you may have been eligible for this time last year may now be unaffordable," he said.
“Applying for a new mortgage up to six months before your current fixed rate deal ends could potentially help you get ahead of any further interest rate increases without paying fees to end your existing mortgage early. If rates continue to climb, you could benefit from a lower rate than you would if you waited for your fixed deal to end."
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