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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

9 Jul 2011

Time to remortgage

Mortgage rates are about as low as anyone can remember right now as lenders seek to entice home owners with attractive interest rates. With the slow-down in the housing market this is hardly surprising. Normally you would expect lower house prices to attract house buyers almost regardless of the mortgage rates. Sellers are seemingly holding out for higher prices and just not selling at the rate that demand dictates, therefore the market has slowed in it's activity. In order to keep the market going, lenders are having to offer great deals.
What this means, is that if you don't have a tracker mortgage, you may want to remortgage to take advantage of the low rates.
Bank base rate is still holding at 0.5%, so there has never been a better time to remortgage - this rate has persisted for nearly two and a half years now and shows no indication of rising before the end of 2011.
Some fixed deals are available for about 3 or 4%, depending on the term of the mortgage, the longer term, the higher the rate indicating the expected course that interest rates will take. Be warned though, unless you will be making an interest saving of £1000, the cost of the remortgage will be higher than the savings you can make.
There are tracker deals about too, but unless you got yourself a tracker BEFORE the rates dropped so low, this is more of a gamble. Those who managed to secure a tracker before the rate dropped, may have one that tracks about 1% or even less above base rate, however base rate is so low now, that you will be lucky to find one that tracks less than 2% above.
If you are thinking of remortgaging, by all means take a look at all the offers out there, but also get the advice of a good independent advisor. At the same time, don't be frightened to tell the advisor exactly what you want - take a wish-list with you, and ask the advisor to find a mortgage that fits your requirements.
Twice I was persuaded (against my better judgment) to go with fixed mortages, until I insisted last time that I wanted a lifetime tracker mortgage. Again it cost £1000 (I just hate those sign-on fees - which is why I insisted on a LIFETIME tracker), but we have made tremendous savings since the rate went so low. This has allowed me to overpay my mortgage for the last two years. There is a kind of financial karma in this since we have a endowment mortgage which is unlikely to pay off the loan when it matures - overpaying means there will be less of a loan to pay off. I reckon we have paid off about 6 or 7% off the principal in the last two years through overpayment, another year of this and we will have paid off 10%.
It goes to show that no-one knows what will happen over the term of a twenty-five year mortgage - it tells you to be wary of the markets, but also tells you that whilst you are on the swings now, the roundabouts are just around the corner...

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