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There may never be a better time to remortgage

13 February 2015

Mortgage lenders are falling over themselves to get homeowners’ custom after Bank of England Governor Mark Carney announced that the base interest rate is unlikely to rise this year, and will remain at the record low rate of 0.5% - if not even lower – until inflation increases.

At the moment two year fixed rate mortgage deals are around 1%, while five year fixed deals are around 2%. Those who have a good loan to value ratio – homeowners who can put down around 40% deposit, or the amount of mortgage you have outstanding in relation to how much your house is worth is below 60% - are able to get the lowest interest rates.

For those trying to get on the housing ladder, these record low mortgage rates are still great news, but it’s worth remembering that since the mortgage market review rules took effect in April of last year they have to go through stringent affordability checks before getting approval.

Matt Sanders, Gocompare.com’s mortgage spokesman, said: “First time buyers and those looking to move house with a new mortgage should think about doing a personal finance audit before approaching a lender. Check your credit file, work out your income and outgoings, make sure you could afford an increase on your mortgage should the rates rise and consider speaking to an independent mortgage advisor. Get fully armed with all the information you need before approaching a lender.

“Those who are looking to remortgage should check the small print of these record low rates. Many products have substantial up front non-refundable arrangement fees and as the interest rates have tumbled, these fees have risen. Factor those fees into any mortgage product you are looking to take out. There are some mortgages available without upfront fees, but be aware that the interest rates on those products may not be as low. However, the slightly higher interest rate may be worth paying to avoid the upfront fee.

Matt added: “The devil really is in the detail with mortgage fees and the respective interest rates. A minute difference in an interest rate could make the difference to whether you are better off going for a lower rate of interest and a fee or not. It’s important to carefully work out the pros and cons and if you are struggling to calculate which one would be cheaper, call in the experts, in this case an independent IFA.

“With the Bank of England Base interest rate likely to remain at 0.5% or even lower throughout this year it’s still worth those who are on a fixed rate mortgage shopping around. The penalty fee you may have to pay to get out of your current deal could be offset by the savings you make in the long term for having a lower rate mortgage. Just compare the figures carefully before jumping ship.”