Re-Mortgaging: Now may be the time to fix

Tuesday, 16th June 2009 09:37 - by Resident IFA

On April 15th, I Blogged and asked the question “Mortgage rates: When is a good time to buy your next product?” I think the answer is NOW. Trackers Lenders have understandably re-priced their Tracker products to reflect the extraordinarily low Bank of England (BoE) ‘Base rate’, being 0.5%. Whereas you would have seen products of, say, ‘Base minus 0.1%’ a couple of years ago, a similarly good re-mortgage product might now be in the region of ‘Base plus 2.5%’. This equates to a pay-rate of 3%, needing five 0.5% BoE Base rate increases to get to 5.5%, around the level of a couple of years ago. You may see these fluctuations and potential increases as a risk worth taking. Fixed I believe, and have seen first-hand, that the majority of people prefer the security a fixed rate re-mortgage product provides. The rate you sign-up for on Day 1 is the rate that will pervade for the rest of the product term i.e. 3 years, 5 years, etc. I have seen fixed rates creep up by the odd 0.1% or 0.2% over the past few months, but felt strongly enough to secure my fixed-rate product, and my girlfriend’s, over the weekend. Yesterday, I also undertook a review of the ‘Mortgage waiting list’ I had recently built-up. This consisted of Clients whose ‘revert to’ rates after the expiry of their mortgage product were so compelling (low) that it is was worth their while staying on the ‘revert to’ rate and enjoy the resulting lower mortgage payments for a while. Of course, this leads to a timing decision of when to plump for a new product, whether fixed rate or otherwise. Only one Client clearly benefited from taking action now – and they have been duly informed of the need to review their situation. This has been heightened by a product update e-mail I received this morning from Moneyfacts, listing Cheltenham & Gloucester as having increased their fixed rates by up to 0.7%, Chelsea Building Society by 0.25%, and Principality Building Society by up to 0.4%. These increases seem to be a ‘call to action’ in my book, but the question of whether you may have missed the boat is starting to raise its ugly head. As a crumb of comfort, the 3 and 5-year fixed rates I found for the aforementioned Client were 4.79% and 4.99% respectively, including free legal work, free property valuation, and no product/arrangement fee. Don’t hang around! Until next time…