When it comes to remortgage deals, fixed rates have edged up recently but at a slow rate, as expectations of how much the Bank of England base rate may fall, and when, move further into the future.
Five-year fixed rates are currently cheaper than two-year deals and opinions on whether rates will fall this year differ so taking a gamble on a variable rate may not pay off. So before you jump into your next mortgage deal, it is important to understand how the process works and take advice from a mortgage broker.
Thousands of homeowners will be bracing themselves for a mortgage rate shock if they’re due to remortgage this year. If you're coming off an affordable fixed-rate mortgage in 2024, your new mortgage is likely to cost more than your current one. The reason for this is that mortgage rates are much higher than deals seen in previous years.
For example, in February 2022, someone remortgaging with a 40% deposit could get an average two-year fixed rate of 1.82%, according to data firm Moneyfacts. Two years on and the equivalent deal costs 5.06%.
While some homeowners will be wondering whether they should fix their mortgage, and how long for, it's important they get advice tailored to their specific circumstances from a mortgage broker.
Best remortgage deals in May 2024
Rates are correct at the time of writing and are for illustrative purposes. Speak to your lender or mortgage broker to find the best deal for your specific circumstances.
Early repayment charges apply. No valuation costs. Only available through a mortgage broker. A rate of 4.64% is available without an arrangement fee. £500 cash back. Free legal work.
Early repayment charges apply. No valuation costs. The deal comes with £500 cash back. A minimum loan restriction of £300,000 applies.
Free valuation and £250 cash back. No early repayment charges apply. This deal tracks the Bank of England Base Rate, currently 5.25%, by 0.14 percentage points above the base rate. If the base rate goes up or down your rate will track its change by this margin.
Early repayment charges apply. This deal comes with a free valuation AND £250 cash back.
Early repayment charges apply. This deal has no valuation fee and comes with £250 cash back.
You can also use our mortgage calculator for guidance on how much you could borrow:
When should you start looking for your remortgage deal?
You don’t need to wait until your fixed rate ends before you start hunting for a remortgage deal. You can start looking for a new remortgage deal up to six months ahead of your old one expiring.
You can reserve the rate in advance and proceed with the remortgage process but hold off your completion until the day after your deal expires. That way you’ll avoid moving on to your lender’s more expensive standard variable rate at all.
If there are lower rates available from your remortgage lender by the time you come to switch deals you can usually ditch the one you reserved and grab the cheaper one without losing any money.
Check what rates your existing lender is willing to offer you. They often reserve exclusive, cheaper rates for their own borrowers and some lenders will let you switch to a cheaper rate six months before your old one ends, penalty free.
How to find the right remortgage deal for your circumstances
To get the best mortgage deal, you need to compare rates and get your calculator ready to do some sums. You can search online for the best remortgage rates using a price comparison website, such as our sister brand Go.Compare. By submitting basic details such as your annual salary, how much your home is worth and how much you want to borrow, you’ll find the best remortgage deals.
David Hollingworth of broker L&C Mortgages says: ‘The starting point when selecting a remortgage is likely to be whether they want to fix the rate or opt for a variable deal which is directly linked to the base rate or to a lender’s standard variable rate. This will generally hinge on how important the security of knowing exactly what they will pay each month is to the individual. Fixed rates give that certainty and will suit those that don’t want to worry about the ups and downs of interest rates.
‘Those that have more flex in their monthly budget and feel that there’s scope for rates to fall may prefer a variable deal. These could get cheaper but it’s important to be able to deal with higher payments if rates are hiked.’
Borrowers should also watch out for the lock-in period. Many mortgage deals will apply charges if the mortgage is repaid within the deal period. These can be substantial and so can limit your flexibility to move home.
And don’t assume your loyalty to your bank will be rewarded with the best rate.
‘Don’t just take an offer from your existing lender without shopping around,’ adds Mr Hollingworth. ‘It could be a good choice, but a mortgage broker will help compare your lender’s deal to the entire market.’
A mortgage broker can search the market for the best deals on your behalf. Brokers also caution borrowers against waiting to remortgage in case rates fall further.
If your deal ends and you end up being transferred to your lender’s standard variable rate while you wait for rates to fall, you may end up spending more in interest than you’ll save.
How to work out how much you will have to repay
You’ll need a calculator to work out the best remortgage deal. Add together the monthly payments for the length of time you are tied in for (normally the duration of a fixed rate) then add the product fee, and minus any cashback.
For example, if you wanted to borrow £200,000 on a five-year fixed rate at 4.22% over 20 years with a £999 fee, it would cost you a total of £75,099 over five years (60 monthly payments of £1,235 plus £999).
You should do the same calculation for other deals you’re considering, then compare the total figures.
When looking at remortgage deals, you’ll need to understand your loan-to-value (LTV). This is how much of your property’s value you need to borrow as a mortgage. When you remortgage, the ‘deposit’ required is actually the equity in your property.
For example, if your house is valued at £200,000 and you need to borrow £150,000, this means you have a deposit/equity of £50,000 (25%) and you can apply for remortgage deals with a maximum LTV of 75%. The higher the proportion of equity you have in your home, the cheaper your rate will be.
Property values have risen significantly over the past two years. The more equity you have in your home the cheaper your rate will be. Make sure you get an up-to-date valuation to make sure you’re unlocking cheap rates that you may now be eligible for.
