Five reasons to remortgage in 2013!
But 2013 looks like it could be the year that switching to a new homeloan makes a comeback, as the numbers start to stack up in favour of remortgaging.
Before the credit crunch borrowers were actively encouraged to switch to a better deal every few years, but the tide turned during the recession.
Frankly most borrowers got a better rate by doing nothing and automatically moving onto on their lender's cheap SVR than they could find if they went to the trouble and expense of moving to a new deal.
But a combination of factors have come together to make remortgaging attractive again, and many mortgage experts reckon that 2013 could be the year that borrowers decide to jump off their lenders' SVR and into a competitive new mortgage deal.
In fact, trade body the Council of Mortgage Lenders (CML) has predicted that the slump in remortgaging seen last year will be completely reversed in 2013, as more borrowers wake up to the advantages to switching.
Below are the top five reasons to remortgage this year:
1. SVRs are rising
Lenders' standard variable rates may have dropped to low levels in response to the Base Rate cut of 2009, but last year saw them creep up again. A host of lenders hiked their Standard Variable Rates during 2012, increasing the monthly mortgage repayments of millions of borrowers, in many cases by hundreds of pounds a year.
If you have been hit with higher monthly costs, switching to a cheaper mortgage is one way to get around them. But even borrowers with lenders who haven't yet increased their SVR are now under no illusions that their lender is free to hike their pay rate whenever it wants. It could be time to consider remortgaging.
2. Cheaper new deals
A mortgage rate war erupted in the Autumn of last year and it shows no signs of abating in 2013. In the first week of the year a raft of new, competitive mortgage rates have been launched, with lenders vying for your business.
There are now dozens of new deals available at less than 3% interest, which is significantly lower than the average standard variable rate of 4.86%. It may not have been worth switching your mortgage a year or so ago, but it's certainly worth checking out the deals on offer now.
3. Protect against rate rises
The Bank of England Base Rate is at an all-time low of 0.5%. While most experts don't expect interest rates to rise in the near future, there are no guarantees. The last few years have been completely unexpected and the only way to be sure that your mortgage rate will not increase is to fix it.
For borrowers on a variable rate who simply don't want to take a chance on interest rates rising, or can't afford to be wrong, now is a great time to take advantage of fixed rates because they really are currently at all-time lows.
4. Get a more flexible deal
Many borrowers are making the most of low interest rates and overpaying their mortgage while they can afford to. In fact according to the CML a third of all borrowers have overpaid their mortgage since 2005. Not only does this reduce your balance more quickly, it cuts the interest you owe your lender and can potentially save you tens of thousands of pounds over the term of your mortgage.
However some mortgage deals don't offer great flexibility, and may charge you a penalty to overpay. As a rule of thumb most major lenders, but not all, will allow you to overpay up to 10% of your outstanding balance a year. If you want to pay more than that you may need to remortgage to a lender that offers more flexibility. Some for example will allow you to overpay 20% a year, and fully flexible deals allow unlimited overpayments.
5. Unlocking deals for mortgage prisoners
The biggest gripe of mortgage borrowers in recent years has been the massive equity levels demanded by lenders. In order to bag the best rates you need to have 40% equity, and for those who can only muster 10% interest rates have been prohibitively expensive.
This looks to be changing in 2013, as a result of the Government's Funding for Lending Scheme. By making cheap funds available to lenders on the condition that they actually lend the money, the scheme seems to have already been successful in getting lenders to offer more competitive rates to borrowers with low levels of equity.
2013 has already seen some keenly priced mortgages launched up to 90% of a property's value and a survey of mortgage lenders by the Bank of England showed that they reckon they will lend more in 2013 to those borrowers with smaller amounts upfront. This is important as it will open up remortgaging to a swathe of borrowers who were previously labelled mortgage prisoners and were unable to switch.