Timing is Everything, When Would Be the Perfect Time to Remortgage in the Current Economic Climate?
Posted on December 5, 2011
Filed Under Mortgage, Personal Finance | Leave a Comment
Over the past few years due to the recession and financial crisis in the UK, interest rates have been at their lowest ever.
Considering there are many more borrowers than savers in the UK, it has been a good period for both businesses and individuals. However, interest rates may be set to rise in the near future, resulting in payment increases for millions of borrowers.
So, is it the right time for you to remortgage? To help you decide, we’ll examine the Bank of England base rate now, in 2001 and in 1991 to consider what long term trends can be found. In May 2011 the Bank of England Base rate is at 0.5 per cent, a record low. Ten years ago the Base rate was at five per cent, whilst twenty years ago the Bank of England Base rate was higher again, at 12 per cent.
The Base rate, set by the Bank of England’s Monetary Policy Committee (MPC) is ordinarily lower than many of the mortgage deals offered by the UK’s major lenders. However, mortgage rates at present are at lower levels than they have been in some time. An example is a Nat West deal that offers a tracker mortgage starting at 2.69 per cent for two years, increasing to 4 per cent thereafter. These rates are lower than the Base rate just ten years ago.
The circumstances that surrounded the Bank of England’s decision to slash the Base rate to its current level were unique, and they related to the global financial crisis that struck the economy in 2008. However, as Britain’s economy recovers, interest rates are likely to rise and even though the Bank of England’s Governor, Mervyn King, recently voted against such a rise, it is not expected to be long before the MPC votes to increase the Base rate.
Most financial experts expect rates to rise gradually rather than quickly. The Base rate is expected to return to a level at around 3-4 per cent over the next few years, meaning that High Street mortgage rates are likely to be available at around 6 per cent. Taking these figures into account, now may be the perfect time to remortgage.
Another reason why it may be time to start shopping around for a remortgage is due to the banks finally relaxing some of their lending criteria. Since the ‘credit crunch’, banks have tightened their lending criteria making it more and more difficult to be agreed for a home loan. For two years banks have been extremely risk averse although there are signs that this is starting to change.
According to various sources, since February 2011, there has been an increase of one fifth on remortgage lending, so it is advisable to take advantage of the increased lending before interest rates go up, so that you can make the most of the lowest deals available on the market while rates are still relatively low.
It is also perfect conditions at present to remortgage if you are thinking of doing home improvements or planning on starting your own business, as you will be getting the most for your money in the current market conditions, so your business would be able to grow more quickly than if interest rates were higher.
So the answer really is yes. Now is a good time to remortgage before interest rates are hiked. This can help you to avoid paying unnecessarily high levels of interest on your mortgage now and in the years to come. Make sure you shop around, as the market place is extremely competitive, and get advice if you’re unsure about any part of the remortgage process.
Howard O’Gollegos writes for Just Commercial Mortgages.com the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.
Related posts:
- How Homeowners Can Benefit From An Adverse Remortgage
- Homeowners Can Make An Adverse Remortgage Work For Them
- The Correct Way People Who Have Bad Credit Standing Are Able To Remortgage Their Bank Loan
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