After the festivities of Christmas and the New Year January has come around again and it’s time to start thinking about the year ahead. This includes planning your finances and of course reviewing your mortgage. It may not be at the top of your list, but maybe you should consider bumping it up a few places as there are plenty of savings to be made by the savvy homeowner and landlord.
To make reviewing your mortgage requirements simpler, we have put together a shortlist of 4 mortgage resolutions that we think you should be sticking to in 2018.
1. Reviewing your mortgage requirements
We recommend examining your current mortgage or mortgages regularly. There are certain mortgage pitfalls that are easy to slip into that may mean you are paying more than you need to; this includes falling onto your lender’s Standard Variable Rate (SVR) once the initial period of your mortgage product or rate has ended. This variable rate often tracks a base rate set by the lender or the Bank of England base rate. It is most likely to be higher than the initial mortgage rate, although it can also be lower.1
You may also want to consider how your finances will fair in the face of further increases in the base rate. Even before the Bank of England announced a base rate rise of 0.25% in November 2017, the UK’s largest mortgage lenders began to increase their rates. Some commentators have predicted that the period of historically low interest rates has now ended.
There has even been speculation that the Bank of England will incrementally increase the base rate further in the coming year to counteract creeping inflation.https://www.ft.com/content/2f2354a8-ebe5-11e7-bd17-521324c81e23 Reviewing your mortgage now is crucial to ensuring that you are prepared for potentially higher mortgage rates.
2. Consider remortgaging
This leads us neatly on to resolution number two: reviewing the market to see if there are mortgage products better suited to your needs and circumstances, which could reduce your monthly mortgage repayments.
You may decide to fix your mortgage rate before any further rate increases. Although 5 year fixed rate products may have slightly higher interest rates, over the long term they provide you with more certainty about the amount you will pay. This may allow you to plan your finances more effectively.2
Rates may have risen since November, but it has not been dramatic enough to cause a significant shock to the market. The Bank of England reported that in the last quarter of 2017, the difference between the central bank’s base interest rate and the average mortgage rates charged to borrowers “narrowed significantly”.3
So it would seem that lenders are competing with each other and not passing all of the rate increase onto borrowers. This means there are still some very competitive rates available, so it is well worth seeking professional advice to see if you can get a better deal.
Check out our mortgage calculator see how much you might be able to reduce your monthly mortgage payments by if you switched to a product with a lower rate.
If you are unsure of which mortgage products are available to you, request a mortgage quote and a highly experienced Mortgage Manager will talk you through your options.
3. Could making overpayments benefit you
With the prospect of rates potentially increasing further it may benefit you in the future to make overpayments on your mortgage while rates remain low. Doing this will decrease the amount of your borrowing and improve the Loan to Value ratio of your mortgage. Eating into your mortgage debt will strengthen your financial position.
Remember that with interest rates currently comparatively low, the financial benefits of overpaying on your mortgage may outweigh the benefits of putting available cash into savings. You will most likely not pay interest on the amount you overpay. As a rule, most lenders will allow you to make overpayments of 10% of the mortgage amount each year without incurring any charges. However, it is essential to check this with your lender before you do.1
4. Stay protected
Protecting your property with adequate buildings and contents insurance is also an important resolution for 2018. Should anything happen to your property or possessions you may well be very thankful, you had it in place.
If you wish to discuss any of the mortgage resolutions listed above with one of our Mortgage Managers, please call us on 0207 519 4985, or send us an email.
We will take the time to review your situation fully and research the market to find you the best mortgage products, most suited to your current needs and circumstances.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you re-mortgage.