Is The Economic Situation Making It The Right Time For a Remortgage?

Whilst the last two years have been a difficult period for savers, they have been an excellent time for borrowers. The Bank of England has kept interest rates at record low levels since Spring 2009 meaning many mortgage borrowers have benefited from low payments.

Low rates have meant that many British individuals and businesses have seen their loan and mortgage payments plummet over the last couple of years. However, the days of record low Base rates may be about to come to an end.

Over the years, the Bank of England base rate has gradually come down lower and lower. It is due to the financial crisis that rates came down to the lowest ever 0.5%, and this was to try to encourage consumer spending to help the recovery of the UK economy.

The Base rate, set by the Bank of England's Monetary Policy Committee (MPC) is ordinarily lower than many of the mortgage deals offered by the UK's major lenders. However, mortgage rates at present are at lower levels than they have been in some time. An example is a Nat West deal that offers a tracker mortgage starting at 2.69 per cent for two years, increasing to 4 per cent thereafter. These rates are lower than the Base rate just ten years ago.

The Monetary Policy Committee of the Bank of England had a vote earlier this year, and the majority vote was to leave interest rates as they were for the time being. However, it is now thought that interest rates will be increased later this year due to inflation rates at almost 4%.

But it is difficult to judge how high the interest rates will go. It is unlikely that they will increase very quickly, as this would be unstable and could result in more issues than it would solve, so the likelihood is that we will see a 1% increase over the year, with further increases over the next 3-5 years.

Mortgage lenders are now more open to lending again now that the UK has started its long road to recovery, and with interest rates set by the Bank of England set to increase in the near future, it would seem that now is the time to remortgage to get a fixed rate deal.

Remortgage approvals rose by 20 per cent between March and April 2011 and so there do seem to be signs that lenders are loosening their criteria and encouraging more homeowners to switch their home loans.

It is also perfect conditions at present to remortgage if you are thinking of doing home improvements or planning on starting your own business, as you will be getting the most for your money in the current market conditions, so your business would be able to grow more quickly than if interest rates were higher.

So the answer really is yes. Now is a good time to remortgage before interest rates are hiked. This can help you to avoid paying unnecessarily high levels of interest on your mortgage now and in the years to come. Make sure you shop around, as the market place is extremely competitive, and get advice if you're unsure about any part of the remortgage process.


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Timothy Frodsham writes for JustRemortgages.com one of the UK's top sites for the latest remortgage rates and best remortgage deals.