The Complete Guide to Remortgaging in 2023: Calculate Your New Deal
Introduction
As the year 2023 unfolds, the mortgage market remains in a state of volatility, with average rates for fixed-term deals continuing to rise. Core inflation figures have been stubbornly high, which has contributed to the current situation. Amidst these challenges, around 2.5 million homeowners are due to reach the end of fixed-rate mortgage deals throughout 2023 and 2024. Many of them are facing the prospect of refinancing at rates that have more than doubled from what they were used to. In this blog post, we’ll explore everything you need to know about remortgaging in 2023, including mortgage rates, potential rate changes, finding the best deals, and more. Plus, we have a handy calculator to help you estimate the cost of your new deal.
Current Mortgage Market
As of now, the average two-year fixed-rate mortgage stands at 6.81%, a significant jump from below 3% in July 2021. Similarly, the average five-year fixed rate is 6.33%. These rates are even higher than the peaks seen in November 2022. The recent increases in mortgage rates were influenced by the surge in core inflation, reaching 7.1% in May but easing slightly to 6.9% in June. Despite the decline, there are still uncertainties about future Bank Rate increases and their impact on mortgage rates.
Potential for Lower Mortgage Rates
The Bank of England has made 13 consecutive raises to its central interest rate, known as the Bank Rate, since December 2021. However, recent declines in core inflation and falling swap rates may indicate that the Bank Rate’s peak could be lower than previously estimated. Consequently, there is a possibility that mortgage rates might start to fall.
Finding the Best Interest Rates
If you’re considering remortgaging, finding the best interest rate is crucial. The cheapest two-year fix, as of now, is offered by Progressive Building Society at 5.69%. For a five-year fix, Cumberland Building Society offers the best deal at 5.28%. However, it’s essential to look beyond the headline rate and consider the overall cost of the deal, including fees, mortgage valuation, and legal conveyance expenses.
Locking in a Rate Duration
Brokers suggest that a typical borrower should fix their mortgage rate for two years, as this could minimize the time spent paying an inflated rate. Mortgage rates are predicted to fall by 2025, offering opportunities for cheaper repayments. However, choosing the right duration will depend on individual financial circumstances, and it’s essential to check for any repayment penalties should you need to exit the deal early.
Factors Affecting Your Mortgage Rate
Borrowers can improve their chances of securing lower interest rates by increasing their equity in the property, leading to a lower loan-to-value ratio (LTV). A bigger deposit translates to a reduced risk for lenders, making them more willing to offer lower rates. If you have extra cash, you might consider paying down part of the mortgage to access a better rate. Additionally, those with substantial cash reserves can benefit from an offset mortgage, where savings can be used to reduce the mortgage interest payable.
Expert Mortgage Advice
With the mortgage market evolving rapidly, seeking advice from an independent mortgage adviser can save you money. Specialist mortgages, such as offset deals, require careful consideration, and a knowledgeable adviser can guide you through the process.
Interest-Only Mortgages
For homeowners facing difficulties in paying their mortgage bills, switching to interest-only deals without a formal repayment plan can be an option. However, it’s essential to have a credible repayment plan in place once the interest-free period ends.
Conclusion
Remortgaging in 2023 presents both challenges and opportunities for homeowners. As mortgage rates continue to fluctuate, staying informed and seeking expert advice are crucial steps to securing the best deal. Remember, it’s not just about the interest rate, but also the overall cost, fees, and individual financial circumstances that should guide your decision. By using our mortgage calculator and consulting a mortgage adviser, you can navigate the remortgaging process with confidence and make the most of the current market conditions.