As the UK housing market braces for a significant shift, approximately 1.8 million fixed-rate mortgage deals are set to expire in 2026. This impending deadline means that a vast number of borrowers will soon need to secure new home loans. If you find yourself among this group, now is the ideal time to start preparing by reviewing your current mortgage details and exploring the available options.
Understanding the Remortgage Landscape
Interest rates have experienced considerable volatility since late 2021, creating a challenging environment for homeowners. Those coming off five-year fixed deals may face a substantial increase in their monthly payments when transitioning to a new product. In contrast, borrowers whose two-year fixed deals are ending could potentially save hundreds of pounds each month by switching to more favourable rates.
With further cuts to the Bank of England base rate anticipated this year, the cost of new mortgage deals is likely to decrease. The next interest rate announcement is scheduled for 5 February, which could provide clearer guidance for borrowers. While some individuals may prefer to fix their rates again for payment security, others might opt for base-rate tracker deals to benefit from potential future reductions. Ultimately, the decision hinges on interest rate movements, and staying informed through reliable news sources is crucial, though predicting future rates remains uncertain in these turbulent times.
Avoiding the Standard Variable Rate Trap
If you fail to arrange a new deal before your existing one ends, you will typically be moved onto your lender's standard variable rate (SVR). This rate, which averages 7.25% according to financial data provider Moneyfacts, can be set and adjusted at the lender's discretion and is often higher than your current rate. While it might be tempting to remain on the SVR while monitoring interest rate trends, mortgage brokers advise against this for extended periods, as it can lead to significant financial losses.
For example, a borrower with a £250,000 mortgage could save over £500 per month by securing a deal at 3.65% instead of paying an SVR of 7.25%. However, there are scenarios where staying on the SVR might be beneficial, such as if you are nearing the end of your mortgage term or have a very small remaining balance. In these cases, arrangement fees for a new loan, which can range from £1,000 to £2,000, might outweigh any potential savings.
Strategies for Securing the Best Deal
Engage with Your Current Lender
Your current lender will typically contact you three to four months before your deal expires, offering a selection of products, such as two-year or five-year fixed rates, with or without fees. Opting for a product transfer with your existing lender can be quicker and less cumbersome than switching to a new provider, as it involves fewer affordability checks and less paperwork. Additionally, you may avoid valuation and legal fees, making this an attractive option for many borrowers.
Compare Offers from Multiple Lenders
With over 7,100 mortgage products available in the UK—the highest number since 2007—it is essential to shop around. Compare the deals offered by your current lender with those from rivals, as many lenders provide free valuations and legal services. Utilise resources like Moneyfacts and MoneySavingExpert, which publish regularly updated best-buy tables to help you make an informed decision.
Consider Using a Mortgage Broker
A mortgage broker can assist in comparing offers, assessing your individual circumstances, and handling the necessary paperwork. Some deals are exclusively available through brokers, so it is advisable to choose a whole-of-market broker who can access all available products. While some brokers charge fees, many, such as L&C Mortgages, operate on a no-fee basis, earning commissions from lenders upon mortgage completion.
Evaluating Rate Options and Flexibility
Fixed mortgage rates are currently at their lowest levels since 2022, with the best rates for remortgaging around 3.64% for two-year fixes and 3.70% for five-year fixes. When deciding between fixed and tracker rates, consider your need for payment stability versus flexibility. Fixed rates offer certainty and are typically cheaper than trackers, which currently average around 3.90%. However, tracker rates may appeal to those expecting future rate cuts or needing flexibility, as they often come without early repayment charges.
Remortgage offers are usually valid for up to six months, allowing you to reserve a deal in advance. This strategy enables you to lock in a lower rate if rates rise or switch to a better offer if rates fall, providing a hedge against market fluctuations.
Unlocking Cash for Home Improvements
For some homeowners, remortgaging presents an opportunity to finance home improvements, such as loft conversions. If you do not need to remortgage but require additional funds, borrowing more from your existing lender might be the most cost-effective option. However, not all lenders offer further advances, so it is important to inquire about this possibility.
By taking proactive steps and exploring all available avenues, you can navigate the remortgaging process effectively and secure a deal that aligns with your financial goals and circumstances.
