Cheap Remortgages Should Not Become the Expected Norm
Cheap remortgages have become an expected norm from homeowners. The long running 0.5 per cent interest rate set by the Bank of England’s Monetary Policy Committee (MPC) has become a normal rate and borrowers are getting used to the cheap rates. Because of the expectation that cheap rates are here to stay for a long time it is easy to get comfortable that an increase is not likely in the near future. While the economy may be too weak to increase the cost of borrowing to consumers according to government thoughts it may not be the same when it comes to lenders.
The MPC does indeed set the standard base interest rate but the rates offered by lenders in their loans are much up to the lender. If lending is competitive among lenders then they will offer their very best rates. This is what was pushing all of the cheap deals at the end of summer last year and through to early winter. Lenders hoped to bring in homeowners and became so competitive for the new borrowers that they offered fixed rate remortgages in line with trackers. The competition between lenders soon started to end as there were warnings that the economy would contract rather than grow and if so it might lead to a second recession. Lenders changed their outlook and began pulling their best remortgage deals and replacing them with slightly higher ones.
The remortgage deals that had been expected to stay around for a long time were no longer available. Even at a slight increase they are still attractive but to have been the borrower that grabbed one of the cheap fixed remortgages that were offered would have been financially helpful. Homeowners should not become used to the cheap rates but rather should secure a cheap rate when they can and when it is beneficial.