Remortgage and cost of living

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 09. April 2022

Mortgage brokers, do you think rising cost of living might impact remortgage activity? 

  1. Are you seeing heightened remortgage activity? Do you expect this to continue?
  2. Do you think some borrowers may struggle to remortgage in the near future?
  3. What options do borrowers have if they are struggling to remortgage?
  4. What advice would you give to people looking to remortgage in the current market?

5 responses from the Newspage community

Star Quote
"With the recent Bank of England base rate rises, we have seen more borrowers keen to get a fixed rate before they go up once again. Many mortgages rates have gone up by 1% already and most agree the rates may well go up once again throughout the year. Due to the cost of living crisis, as well as the national insurance hike, we have already seen borrowers failing lenders' affordability calculations and that trend is set to continue as lenders factor in our soaring inflation. For those looking to remortgage, the key is to obtain quality, independent advice. There are many lenders out there that are not available on the high street and sticking with your current lender may well prove costly."
"This year was always set to be a very busy year for remortgages, simply due to the huge number of people whose deals end this year. Cost of living crisis or not, they'll want to be doing something and not simply sit on the lender's Standard Variable Rate, usually the most expensive rate in a lender's product range. It's widely expected that affordability models will tighten as the cost of living increases feed through to ONS data, which many lenders use for their calculations. This could potentially see people being told they can't afford to remortgage, even if they aren't looking to borrow any extra money. Don't panic however, as most lenders will have a range of deals for existing customers that you can switch to with no need for any further affordability checks (called a Product Transfer, or Product Switch), giving you access to more competitive deals than the SVR. Don't just assume you can't remortgage and opt for a deal with your current lender, though; go and have a chat with a mortgage broker who can guide you through the maze of deals and options."
"Anyone thinking about remortgaging needs to get on with it now, today. We're seeing a huge increase in people wanting to remortgage, with a growing number wanting to consolidate unsecured debt at the same time. While debt consolidation can be a bad idea, with the looming cost of living crisis and wages being stretched to breaking point, and house prices having ballooned, it can make sense to take advantage of the rise in values and clear down your personal balance sheet. Even with rates on the rise, a trend that is expected to continue, people should be aware of the fact that as long as inflation is higher than their mortgage rate, it in effect becomes a real negative rate when you take it all into consideration."
"Remortgage activity remains strong, and we're noticing clients looking to remortgage early before rates go up further. The danger is for those who've remortgaged at rock bottom rates, and whose circumstances have changed considerably since. Most obviously due to the pandemic, many self-employed people's profits and earnings are only just starting to bounce back. Some will have had adverse credit too, which can make it tricky to remortgage at a decent rate. Many people unfortunately are in for a nasty surprise when they come to remortgage. My advice for anyone looking to remortgage is to keep your discretionary spending down and check your credit file early. If there's any problems, like not being on the Electoral Roll, you have time to remedy them."
"We are inundated with borrowers looking to lock into a remortgage rate as far as 6 months ahead of their current fixed rate ending. With rates on the rise, it's a sensible thing to do as it means you are able to take advantage of current interest rates despite the fact you are still committed to your current rate for another half a year. If rates rise further in that time, your rate will remain locked in and if rates drop you can reapply so it leaves you in a strong position in volatile market conditions. Some borrowers may find it more difficult to remortgage due to tightened affordability assessments but in the event you are unable to remortgage to a new lender, you should have the option to switch to a new rate with your existing lender, which will be better than reverting to the standard variable rate."