Should you remortgage your property before interest rates increase?

Many homeowners are looking to remortgage on favourable fixed rate terms to avoid the danger of an interest rate increase at the turn of the year. Taking fluctuations into account, average mortgage rates have steadily fallen since July 2005 from 5.25% to 3.19% in July 2015.* To put this into context some providers are offering 2-year fixed rates buy-to-let mortgages for less than 3% (rising to less than 6% after that). The Financial Times also reports that average two-year fixed rates are at 2,82% and five-year deals are 3.29% – some even fall below 1% (subject to other terms). Buy-to-let remortgage figures have been better than owner-occupier rates because landlords are looking to save on mortgage interest while also protecting against rate rises in the future by fixing their rate. It has long been predicted that rates will go up at the turn of the year and this has been reflected in borrowers remortgaging their properties on low rates while they still can. This is likely to increase significantly as the economic recovery continues – the banks will increase their interest rates, and higher interest rates means higher mortgage repayments. The question for landlords is simple: In comparison to your current mortgage rate – will the guarantee of a low rate, fixed term mortgage that is exempt from interest rate increases, save you money in the long run? If so, it may be time for you to remortgage. Although the debate on a base rate rise has increased in recent months it took until June for homeowners to react. Mortgage values jumped 34% to £5.1bn in June from the same month last year, and buy-to-let remortgaging totalled £1.8bn, an increase of 64% from the same period.** However, be warned. Remortgaging on a variable rate means an increase in the repayable amount upon a base rate increase – so you must consider whether you can afford a new mortgage after the base rate rises. This information comes at a time when the National Landlords Association has released new figures that landlords’ biggest outgoing is mortgage repayments. On average a landlord spends 28% of their rental income on meeting their mortgage repayments, with maintenance coming in second place at 11% of rental income.*** * http://mortgage-x.com/general/national_monthly_average.asp?y=2005 ** http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11795925/Homeowners-in-frantic-race-to-remortgage-before-rates-go-up.html *** http://www.landlords.org.uk/news-campaigns/news/over-quarter-landlords%E2%80%99-income-goes-on-mortgage-repayments