The surprise 0.8 per cent jump in third-quarter GDP has suddenly strengthened the arguments in favour of a rate hike sooner rather than later.
This prospect may strike fear into the hearts of homeowners on cheap standard variable rates (SVRs) but it’s a marketing dream for lenders trying to encourage borrowers to remortgage. No matter how much they’ve cut remortgage rates in the past fortnight – and it doesn’t get much better than base-rate trackers from 1.99 per cent and five-year fixes from 3.69 per cent – without the real threat of a rise in interest rates, some homeowners will never be motivated enough to take the plunge.
But interest in remortgaging – at least for those with significant equity in their homes of 40 or 50 per cent who can take advantage of market-leading rates – is finally building. While I’m not convinced interest rates will rise sooner rather than later as the recovery is set to slow in coming months as the fallout from the spending cuts is felt, that may be one of the reasons borrowers might wish to consider remortgaging in the first place.
Public sector workers worried about losing their jobs may want to remortgage while they can still get a decent deal. A five-year fix at a competitive rate would bring security and help with budgeting for many months to come, until a time when the worst of the pain is behind us.
Homeowners concerned about falling house prices, a fear heightened on the back of Nationwide reporting a 0.7 per cent drop in October, may also want to consider remortgaging. They may wish to remortgage before their loan-to-value rises, and becomes even more unattractive to lenders who still favour those with the biggest deposits or levels of equity in their homes.
Borrowers should beware, however, as some of these remortgage rates are offered by lenders keen to get customers off even cheaper variable rates, which aren’t making the lenders any money. There is an opportunity for intermediaries here, as independent advice is so important in helping borrowers work out whether switching is worthwhile, enabling them to get the right product for their circumstances.
Melanie Bien, director, Private Finance
