Getting the balance right on remortgaging – Sneddon

Do they remortgage to a new longer-term fixed rate deal, giving them the security that monthly repayments won’t rise over the next few years, or opt for a shorter fix or the option of a tracker in order to take advantage of possible rate reductions later this year? One would presume moving onto a standard variable rate (SVR) is not going to be appealing, although again, it would allow them to act without any early repayment charges (ERCs). 

The Bank of England started to reduce interest rates, with rates edging down by 25 basis points in February, then another 25 basis points last week. But to date, these cuts have been slower and shallower than previously forecast, amid sluggish growth in the UK, an upturn in inflation, and the prospect of global trade wars and geopolitical instability overseas. 

This more volatile background makes it extremely difficult to predict the likelihood of future cuts, reflected in fixed rate pricing. 

For borrowers, these difficult decisions have to be made against a backdrop of higher mortgage costs, with both variable and fixed rate deals now significantly more expensive than five years ago. With many homeowners feeling the pinch, they will be nervous about making a wrong decision that could cost them in the long run. 

Given these uncertainties, it’s important for clients to be offered lending solutions that balance security and flexibility in a single product, allowing homeowners to hedge their bets in a complex and uncertain market. That’s certainly something we’re focused on at Hinckley & Rugby for Intermediaries. 

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Flexible options 

Traditionally, fixed rate mortgages have been the go-to choice for those remortgaging, offering protection from unexpected rate rises. However, with the prospect of future rate cuts on the horizon, there may be hesitancy among borrowers to lock into longer-term deals, particularly as most come with hefty ERCs. 

This has created a pressing need for more flexible remortgage solutions that can provide certainty around repayments in the near term, without locking people into multi-year contracts with restrictive terms. 

No-ERC remortgages: The best of both worlds 

To meet this need, we now offer a range of ERC-free variable rate mortgages. These are available over a number of different terms and provide a middle ground for homeowners who are unsure of their next move. 

These types of deals allow borrowers to remortgage away from higher SVRs. Borrowers aren’t hemmed in by penalties, as they retain the freedom to switch to a cheaper deal should lower rates become available, or their own circumstances change. 

For brokers, positioning no-ERC remortgages as a hybrid solution can be a game-changer. By presenting these mortgages as a strategic financial tool, brokers can empower clients to make confident decisions without feeling trapped by market uncertainty, enabling them to progress with the remortgage process. 

Digital innovation 

Increased product flexibility and ERC-free mortgages aren’t the only innovations in the remortgage market. New technology, such as the digital portal powered by Pexa, is streamlining the remortgage process, ensuring cases progress smoothly. 

Better connectivity between lenders reduces administration for brokers, offers borrowers real-time updates on their cases and speeds up transaction times across the industry, delivering a more efficient and cost-effective service. 

Hinckley & Rugby for Intermediaries has been leading the way when it comes to these new efficiencies. We adopted Pexa’s technology, delivered by Optima Legal, at the end of last year and now offer this to brokers across the market. 

The mortgage market continues to evolve, both in response to underlying economic conditions and to embrace the benefits of new technology.

By having access to a flexible product range that adapts to market changes and utilises the latest digital technology, brokers and their clients can make informed choices in an unpredictable climate.