Many households will be looking for ways to reduce their monthly outgoings due to rising energy bills being seen throughout the UK and inflation expected to increase over the next few months, as well as the increase in national insurance contributions from April 2022.

For homeowners coming to the end of a fixed rate mortgage deal, or whose deal has already ended, choosing the right remortgage deal can help to save them money.

There is currently a rate war raging between mortgage lenders, which has led many lenders to reduce the rates on their remortgage deals to record lows. This mortgage rate war particularly benefits two and five-year fixed rate borrowers.

While the most competitive deals are often only available to those who own a high amount of equity in their home, usually 40% or more, the rate war has led to competitive rates now being available to those who own less equity in their home.

With rates competitively low, locking into a new mortgage deal or moving from a lender’s standard variable rate (SVR) and onto a new deal, could substantially reduce repayments.

For example, the current average SVR is 4.41%, which would mean that a homeowner with a property valued at £300,000 and who has a mortgage of £180,000 on a 20-year term would be making monthly repayments of £1,130.04. If this same homeowner remortgaged onto the current lowest two-year fixed remortgage rate of 0.84%, they would be making monthly repayments of £815.03 – £315.01 less per month.

Look beyond the mortgage rate

Product Fees

When looking to save money on their next remortgage, homeowners should also consider how much is being charged on product fees.  Locking into a lower mortgage rate will likely impact repayments, but It’s important to check product fees.  Some lenders will offer deals without charging any product fees, while other deals can have product fees of £1,500 or more. It may be better to choose a deal that has a low product fee, or no product fee, even if the actual rate is slightly higher.

Valuation and Legal Fees

Another way to save money when remortgaging is by choosing a deal that has the incentive of free valuation and legal fees. Fortunately, many lenders are offering the incentive of free valuation and legal fees on their most competitive deals, but homeowners may want to check that these are included before proceeding.

Making a lump-sum mortgage repayment

Consecutive lockdowns and working from home have resulted in some consumers being able to save more than they normally would.  It may be a better option for homeowners to use their savings to pay off a lump sum of their mortgage than keeping it in a savings account, especially when savings rates remain low.

Borrowers with a lump sum of money that can be used to repay part of their mortgage may find that when locking into a new deal it is the best time to make a lump sum repayment.

Also, making a lump sum repayment on a mortgage usually increases the equity the homeowner has in their home, which can result in them being eligible for more competitive mortgage rates. Even if the homeowner is not able to get a better deal through increasing the equity they own in their home, paying off a lump sum of their mortgage can help to reduce their monthly repayments.

 Seeking mortgage advice

Remortgaging options available to borrowers are dependent on their personal financial circumstances. However, there may be other ways that homeowners can reduce their repayments and save money. It is advisable for homeowners to speak to a mortgage adviser first who will be able to provide advice tailored to their individual needs and who will be able to select the best options and deals available.

Remortgaging checklist

  • See if your Loan-to-Value (LTV) ratio has changed since your last mortgage deal.
  • Make sure you keep a note of your mortgage end date.
  • Don’t automatically accept your existing mortgage lender’s remortgage offer.
  • Check the total costs of your remortgage including product fees and valuation and legal fees.
  • Have your circumstances changed since your last mortgage?
  • See if your credit rating has changed since your last mortgage deals. Before remortgaging it’s important to check your credit score.

At Beaufort Mortgages, we find the best mortgage rates for First Time Buyers, Home Movers, those looking to Remortgage and landlords requiring Buy To Let mortgages. Get in touch with Dan Godfrey, our independent mortgage adviser.