If you’ve got a mortgage, then it can be all too easy simply to make the monthly repayments and assume you are fine. After all, interest rates are low – so why would you bother to go to the hassle of switching deals? Actually, there are more compelling reasons than ever for sorting out your mortgage. Here are five of them:
1. Sticking on the standard variable rate (SVR) is throwing money away. This is the default rate you go onto once your fixed or other deal has finished. It goes up (and down) when base rate moves. And, as you know, base rate has just gone up. According to online mortgage broker Trussle there are two million borrowers on SVRs. And they say those on their lenders’ SVRs could be paying £2,600 more interest than they would if they were on a two year fixed rate deal. Moneyfacts says that the difference between the average SVR and the average two year fixed rate deal is at its highest level since March 2008. The typical SVR is about 4.85% while the average two year fixed rate is closer to 2.5%.
2. Interest rates could go up. Base rate went up last month to 0.75%. While it’s unlikely to gallop away, the trend is upwards. If you are on a SVR, then your payments will go up with base rate. Take out a fixed rate and you’re protected. At the moment, five year fixed rates look a good deal: and protecting yourself from base rate rises until 2023 sounds a good idea.
3. Lenders want you – as long as you’ve got a good credit record and ideally, if you have a nice chunk of equity in your home. The chances are that if you’ve had your mortgage a few years, your equity has increased (because house prices are up). Today you are probably a more attractive proposition for a lender than you were back then – so you should get a good deal. For example, First Direct has a five year fixed rate of 2.25% for a 90% loan to value – but if you’ve got 40% equity and need a 60% loan to value, the rate is 2.05%.
4. Remortgaging is easy. And cheap. While there will probably be an arrangement fee if you take out a fixed rate loan, lenders will often chip in for the legal fees. And the new lender will do much of the work involved. Check your existing lenders’ deals first: if you swap into one of their deals, then you’re not legally remortgaging (because the lender is the same) so it’s even easier.
5. Mortgage brokers will do the leg work for you. They can search the whole market and often have exclusive deals. Many are free to you – they get their money in referral fees from the lender. I’ve used London & Country in the past, but there are plenty of others around.
And see our guide to remortgaging here