Record low mortgage rates
October 2017 was a golden time for people taking out mortgages; the average two-year fixed-rate hit an all-time low of 2.20%, before increasing to 2.35% in December of that year, following an increase in the base rate from 0.25% to 0.5%.
If you managed to secure a mortgage during that brief all-time low window, you will have been enjoying unprecedented low monthly repayments. And you’re not alone; the all-time low encouraged large numbers of people to secure two-year fixed-rate mortgages – all of which are coming to end in the next few months. In fact, Virgin Money1 calculated that 750,000 borrowers would see the end of their fixed-rate mortgages in the first six months of this year alone.
Increased fixed-rate and SVR mortgages
Of course, all-time lows are wonderful while they last, but it does mean that the only way is up!On 2 August 2018, the Bank of England base rate rose another 0.25% to 0.75%, where it has stayed ever since (it is next due for review in June 2019).Rises in the base rate lead to increases in the rates at which mortgage companies are willing to lend money; average two-year fixed-rate mortgages are currently at around 2.47%2, but the average Standard Variable Rate (SVR) now stands at 4.89%2.
This means if you secured a fixed-rate mortgage of 2.2% in 2017, your monthly repayments will more than double when your fixed term ends and you move onto the SVR. Put another way, the all-time low in 2017 has increased the difference between the fixed-term rates that are coming to an end and the SVR; this in turn means large numbers of borrowers are going to see big jumps in their monthly repayments when their fixed-rate term ends.
Remortgaging to give you financial certainty
If you were one of the home-owners who managed to secure a 2.2% mortgage interest rate (or similar) in 2017, the disparity between your fixed rate and the current SVR means the financial reason for remortgaging at the end of your fixed term is probably stronger than ever.
The good news is that you don’t have to wait until your mortgage has reverted to the SVR (and you have been shocked by the impact on your household finances) to take action. You can start exploring alternative mortgages up to six months before your fixed term ends, enabling you to make sure you remain in control of your finances.