If you're coming to the end of your fixed rate mortgage deal – or if you're already on your lender's standard variable rate (SVR) – you may be wondering whether to remortgage. Well, now could be a great time to do so, as data from Moneyfacts reveals that the cost-saving benefit of remortgaging is at a 10-year high – and it could save you thousands of pounds a year!
The figures show that motivation to remortgage is at its highest since 2008, as the revert rate – the gap between the average fixed rate borrowers are currently on compared with the average SVR – stands at a whopping 2.59%. This is just 0.01% lower than that seen in February 2008 (2.60%), highlighting the benefits of remortgaging.
This is because the average two-year fixed rate mortgage in December 2016 stood at 2.31%, whereas the current SVR is 4.90%. This means someone who's about to come off their two-year mortgage term could face a rate hike of 2.59% if they simply reverted to their lender's SVR, which could add a huge amount to their mortgage payments.
Let's take a look at a few calculations. Using our mortgage calculator, we can see that someone with a typical £200,000 mortgage over a 25-year term would pay £882.20 per month on a repayment basis if they had a rate of 2.35%, yet this would rise to £1,157.56 a month if they reverted to a standard variable rate of 4.90%. Over the year, this would add up to an extra £3,304.32 spent on repayments, all through failing to remortgage. Could you afford that kind of uplift?
Conversely, if they remortgaged to the current average two-year rate of 2.51%, their repayments would only go up by £16.04 per month, or £192.48 per year – a saving of £3,111.84 compared with the revert cost. This is a lot more palatable, and shows how beneficial remortgaging can be.
Have those figures convinced you that now's the time to remortgage? Then it's time to get searching for the right deal! Average rates may have gone up in the last couple of years, but there are still some great deals to be found. Leeds Building Society, for example, offers a two-year mortgage with a rate of just 1.39% to those with a 35% deposit, or if you don't mind a gamble, Skipton Building Society has got a variable rate of 1.58% for two years.
Want more options? Find the best remortgage deals right here, and see how much you could save.