The UK saw a ‘flurry of remortgaging’ in the tail end of 2021, as homeowners rushed to lock in a low rate. In fact, according to the Bank of England, borrowers were enjoying the lowest ever rates in November 2021*. So will this trend continue into 2022? Is there still an opportunity to save money on your mortgage over the coming years by securing a new fixed-rate deal? We’ll discuss the outlook for remortgaging in 2022 in this guide, and explain the different approaches to the market depending on whether you have a fixed-rate or tracker mortgage.
How Does the Bank of England Base Rate Affect Remortgaging?
The ‘base rate’ is the interest rate that the Bank of England (BoE) charges when it loans money to commercial banks, and it’s used as a tool to try and boost the economy or slow down inflation. When the base rate decreases, mortgage rates also fall, and when it increases, mortgage rates rise. In March 2020, the BoE lowered the base rate to a record low of 0.10% as a response to the devastating economic effects of the pandemic. This move saw some of the lowest mortgage rates ever brought to market, and many homeowners took advantage of this by remortgaging to a better deal.
By the end of 2021, the BoE had increased the base rate to 0.25% to try and control the soaring inflation rate. This brings us to 2022 – so where will the mortgage market go from here? The base rate is expected to rise further in the coming years, in fact, historically the average base rate has been closer to 5%**, so borrowers may wish to prepare for larger repayments in the future. However, if rates do rise, it’s likely to be done incrementally to try and ease the transition. So what does this mean for homeowners in 2022? It means there may still be time to lock in a relatively low fixed rate – because even if rates continue to rise through the year, they could still rise a lot higher in the years ahead. With fixed-rate mortgages for 2, 3, 5 or even 10 years on the market, now is the time to see what deals are available to you by speaking to one of our advisors for free.
Should I Remortgage My Fixed-rate Mortgage in 2022?
A fixed-rate mortgage isn’t affected by changes to the base rate, so even if it increases, your monthly repayments will stay the same until your deal ends. At that point, any increase in the base rate may become apparent if you decide to remortgage. You can end a fixed-rate mortgage early and switch to a new deal to take advantage of today’s rates, but you may have to pay an early repayment charge (ERC). Considering mortgage rates could rise, you might be able to save money by remortgaging even if you have to pay an ERC – but we strongly recommend you speak with an advisor so he or she can give you the right advice based on your circumstances and any penalties you may incur from your current mortgage.
If you are approaching the end of your fixed-rate period, we strongly recommend you speak to a mortgage broker about remortgaging. If you don’t remortgage, your lender will move you onto their Standard Variable Rate (SVR) which means your repayments will likely increase. Even if interest rates don’t rise further in 2022, moving onto your lender’s SVR could eat into your monthly income considerably.
Should I Remortgage My Tracker Mortgage in 2022?
A tracker mortgage is affected by changes to the base rate, and therefore, homeowners with this type of mortgage would have benefitted from the drop in interest rates in 2021. However, this also means that if the base rate does increase as it’s expected to, then your tracker mortgage rate will also increase accordingly. So the answer to the question ‘should I remortgage my tracker mortgage in 2022?’, really depends on whether or not you believe interest rates will increase further. If they do, then those who remortgage their tracker mortgage to a fixed-rate deal at today’s rates could save money in the coming years. Some tracker mortgages can be ended without a penalty, but others can’t – so it’s important you seek professional advice based on your circumstances.
The Bottom Line
Remortgaging was popular in 2021 as homeowners locked in some of the lowest ever mortgage rates. As interest rates are still relatively low at the beginning of 2022 but are expected to rise, remortgaging now could save you a lot of money over the years ahead. Whether you’re on a fixed-rate or tracker mortgage, you have nothing to lose by speaking to one of our advisors for free and seeing what deals are available to you.
We’ve been helping our local community with remortgages for over 30 years! We search thousands of products to find a deal that suits your needs. We also guide you through the process and liaise with your lenders and solicitor to ensure your remortgage goes smoothly.
Book your FREE no-obligation consultation with one of our friendly advisors to get going quickly. We have offices in Frimley and Basingstoke, or we can help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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**Source: https://moneytothemasses.com/owning-a-home/mortgages/should-you-fix-your-mortgage-now
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