With millions of homeowners seeing their current fixed-rate mortgage deal ending in 2023, homeowners are facing the prospect of their mortgage payments increasing. The Bank of England has issued a warning that these homeowners face an average mortgage repayment increase of £3000.
2022 has seen the mortgage market in turmoil with mortgage interest rate rises and the deals on offer changing at a rapid pace following the mini-budget in September. Whilst we are now seeing mortgage deals start to reduce again, it is unlikely that the low-interest rates we have become accustomed to over the last decade will return.
It is predicted that we will continue to see the Bank of England increase the Bank of England base rate rise as they try to bring inflation under control. 2022 has seen the base rate increase to its highest level since 2008.
With the high cost of living being experienced and increased energy bills, it appears homeowners are facing yet another increased cost when their fixed mortgage deal ends.
So what can you do to ensure you don’t end up paying more for your new mortgage deal than you have to? Here are the top 5 mistakes to avoid making when it is time to remortgage.
1. Leaving it until the last minute
Remortgage applications can take time especially if you are changing to a new mortgage lender who will be assessing your mortgage application like an application from a new customer. You need to ensure you factor in sufficient time for your remortgage application to be processed so don’t leave it until the month your fixed deal is ending to start looking for a new mortgage deal if you want to avoid being transferred onto your mortgage lender standard variable rate (SVR) which often means higher monthly payments. You can read more about how long remortgage applications take here.
Preparation is key when it comes to remortgaging so make sure you allow sufficient time to understand all your options and process your application. The Mortgage Pride recommend starting to look 6-9 months before your existing fixed deal is due to end to avoid a last-minute panic.
2. Accepting the first mortgage deal you are offered by your existing mortgage lender
Naturally, most homeowners think that their current mortgage lender is going to reward them for their loyalty by offering them the best deals. Unfortunately, this is not always the case. Whilst staying with your existing lender is one option when remortgaging, it isn’t necessarily the best option.
Staying with your existing lender and choosing a new mortgage deal with them (this is known as a product transfer or product switch) can have its advantages and in some situations be the most suitable option for you. However, don’t think it is your only option without speaking to a mortgage broker first. A good mortgage broker will always tell you if it is the best option for you to stay with your existing mortgage lender rather than change to a new mortgage lender, after assessing your full circumstances.
3. Doing nothing!
This is probably one of the worst things you can do. It may be tempting to bury your head in the sand and do nothing but this will likely see you paying more overall for your mortgage than you need to.
4. Thinking the lowest interest rate is the cheapest deal
As whole-of-market mortgage brokers, we are often asked by clients what the lowest mortgage interest rate available is. With thousands of mortgage deals available, we could easily tell you what the lowest interest rate is but that doesn’t mean it is available to you or the most suitable mortgage deal for you.
Also, the interest rate is only part of the bigger picture when it comes to mortgage deals. Mortgage deals may include other costs and incentives such as mortgage lender arrangement fees, legal fees, survey fees or cash back. Therefore the remortgage deal with the lowest interest rate doesn’t mean it is the cheapest deal overall when you factor in the other costs associated so don’t be caught out.
5. Not using a whole of market mortgage broker.
To quote Martin Lewis, “mortgage brokers are worth their weight in gold at the moment.” And this is 100% true. A mortgage broker can not only save you time and effort by comparing multiple mortgage deals with multiple mortgage lenders, they can also make sure you are matched to the cheapest mortgage deal based on your individual circumstances so you don’t pay more for your remortgage than you have to. You can read about the benefits of using a mortgage broker here.
As a whole of market mortgage broker, The Mortgage Pride has access to over 100 different lenders and their mortgage advisers have over 19 years of experience of matching homeowners to the right mortgage deal for them. If you want to see how The Mortgage Pride can save you time, effort and money, contact us today.
*Your home may be repossessed if you do not keep up repayments on your mortgage. You may have an early repayment charge to pay to your existing lender if you remortgage early.