As the UK housing market braces for a significant shift, approximately 1.8 million fixed-rate mortgage deals are set to expire in 2026. For many borrowers, this means it is time to start planning for a new home loan. If you are among those affected, taking proactive steps now can help you secure a more favourable deal and potentially save hundreds of pounds each month.
Understanding the Current Mortgage Landscape
Interest rates have experienced considerable volatility since late 2021, creating a challenging environment for homeowners. Those coming off five-year fixed deals may face increased payments when switching to new products. In contrast, borrowers with expiring two-year fixes could see substantial monthly savings, thanks to recent reductions in mortgage rates.
Further cuts to the Bank of England base rate are anticipated this year, which may lead to additional decreases in the cost of new mortgage deals. The next interest rate announcement is scheduled for 5 February, and staying informed about economic forecasts can aid in decision-making. However, it is important to remember that future rate movements remain uncertain, particularly in these turbulent times.
Why You Should Avoid the Standard Variable Rate
If you fail to arrange a new deal before your existing one ends, you will typically be moved onto your lender's standard variable rate (SVR). This rate, which averages around 7.25% according to Moneyfacts, is often significantly higher than current fixed or tracker rates. Staying on the SVR for an extended period is generally not advisable, as it can lead to unnecessary financial strain.
For example, a borrower with a £250,000 mortgage could save over £500 per month by switching from an SVR of 7.25% to a deal at 3.65%. Exceptions might include those nearing the end of their mortgage term or with very small balances, where arrangement fees could outweigh potential savings.
Steps to Take When Remortgaging
Assess Your Property Value
If you have not remortgaged recently, your home may have increased in value, potentially qualifying you for a lower loan-to-value (LTV) band and better deals. Your existing lender can provide an estimated valuation, but if you plan to switch, you may need to assess your property's worth independently. Websites like Rightmove and Mouseprice offer data on recently sold prices in your area.
Explore Options with Your Current Lender
Lenders typically contact borrowers three to four months before a deal expires, offering product transfers such as two-year or five-year fixes, with or without fees. Opting for a product transfer can be quicker and less cumbersome than switching to a new provider, as it involves fewer affordability checks and paperwork.
Shop Around for Competitive Deals
With over 7,100 mortgage products available in the UK, it is crucial to compare offers from various lenders. Use resources like Moneyfacts and MoneySavingExpert for up-to-date best-buy tables. Some lenders provide free valuations and legal services, which can reduce overall costs.
Consider Using a Mortgage Broker
A whole-of-market mortgage broker can help you navigate the plethora of available deals, assess your individual circumstances, and handle administrative tasks. While some brokers charge fees, others, like L&C Mortgages, operate on a no-fee basis, receiving commission from lenders upon completion.
Weighing Up Fixed Rates Versus Trackers
Fixed mortgage rates are currently at their lowest levels since 2022, with competitive offers around 3.64% for two-year fixes and 3.70% for five-year fixes. These provide payment stability, which is appealing for budgeting purposes.
Tracker deals, linked to the Bank of England base rate, offer flexibility and the potential for lower payments if rates fall further. However, they currently tend to be slightly more expensive than fixed rates, with best-buy trackers around 3.90%. Trackers often come without early repayment charges, making them suitable for those expecting financial changes like bonuses or inheritances.
Reserve a Deal in Advance
Remortgage offers are typically valid for up to six months, allowing you to secure a rate now if your deal is ending soon. This strategy lets you lock in a favourable rate or switch to a better offer if rates decline, without significant financial risk.
Unlock Cash for Home Improvements
Remortgaging can also provide an opportunity to borrow additional funds for home improvements or other needs. Check with your lender about further advances, as not all offer this option, and compare costs with other borrowing methods.
By taking these steps, you can navigate the remortgaging process effectively, ensuring you land a deal that suits your financial situation and goals.
