Britain is already seeing the effects of the recent increase in the Bank of England base rate, with the country’s major mortgage lenders (Barclays, Hailfax, HSBC, Lloyds, Nationwide, and NatWest) hiking their SVR rates by 0.25% in order to recoup some of their added costs.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
However, other banks and building societies have yet to decide how they will be handling the rate hikes, leaving their customers uncertain about the future of their mortgage rates.
About remortgaging…
At the end of the initial term on your mortgage, you have the opportunity to get a better deal on your loan rate.
While many people may just let their mortgage roll over into one with a standard variable rate, it’s often the case that looking to other providers or even negotiating with your current lender will secure you a good rate mortgage, especially now that most lenders are increasing their SVRs.
In fact, experts estimate that shopping around once your introductory period ends can not only save you thousands of pounds over the life of the loan, but in some extreme cases, just over the course of one year.
Current and prospective homeowners in the mortgage/remortgaging process face an intense evaluation
These elevated requirements are designed to keep lending standards high and include potential buyers needing to prove they can afford a mortgage payment with an increased rate in the event the economy warrants extreme rate hikes. Some lenders require evidence you can handle payments 3% higher than the SVR (over 8% with some lenders), even if your rate is well below that number.
The remortgaging process is really no different from the mortgage process, which means you’ll be subject to all the scrutiny you underwent in the first place.
But there is a way to avoid the stress test during remortgaging by considering a long-term fixed-rate mortgage, which will help you lock in a low rate for an extended period of time.
It will help homeowners avoid any immediate effects of a rate hike and it will shield them from any future rate hikes, which seem to be inevitable according to industry experts.
Of course, with a more secure rate, it will most likely be higher than mortgages with shorter terms, but you may be able to borrow more money with a long-term fixed rate.
You will need to decide what works better for you.
Will the base rate affect you?
This isn’t exactly a well-kept secret, but the BoE rate hike seemed to spur the public on to secure mortgages before the full impact could be realised.
Major lender Barclays reported a 43% increase in applications when compared to two weeks prior. Internet searches for cheaper mortgage deals increased by 27% as well according to Hitwise, a search engine monitoring service in the same comparison period.
The fact remains however, that many individuals may now be able to borrow less than they previously could before the rate hike, making the mortgage process even more daunting.
Whether you are looking to save money with a better rate of interest or are in the market for your first property and need guidance during the process, the experts at Dental & Medical Financial Services will work alongside you to ensure that you secure a great rate on a mortgage so you can own your dream home.
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Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.
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