Simon, 32, and Claire, 29, are planning to start a family this year but are worried about budgeting due to the rate shocks that many borrowers are experiencing when coming out of short-term fixed rate mortgage contracts.
They currently have a two-year fixed rate on their mortgage of £120,000, which is due to end in three months’ time. Should they start looking for a remortgage deal now, or wait until their deal ends?
Colin Dale is head of lending at Skipton Building Society
It’s a leap in the dark if Simon and Claire wait, as the market is so uncertain, and even Mystic Meg couldn’t predict if there will be more attractive mortgage deals in three months’ time.
Interest rates are expected to fall but that doesn’t mean lenders’ products will follow, as the months following December’s rate cut showed. If that’s the case, a tracker may be a more appealing option.
Simon and Claire do have the flexibility to shop around before their deal ends and should hedge their bets and look for a product now.
Planning a family means the couple need certainty and they should snap up one of the more competitive fixed rate mortgage deals currently on the market.
However, to avoid the same problem a few years further down the line, they might wish to consider a slightly longer-term mortgage product such as Skipton Building Society’s three-year, five-year, seven-year or even 10-year fixed rate deal.
Alan Lakey is senior partner at Highclere Financial Services
While the Bank of England Base Rate has been edging downwards, the swap rates have been volatile and are currently on the up again.
To ensure future affordability, a fixed rate is essential, particularly as capped rates are currently out of fashion. Longer term fixes of five years or so are currently lower than the two and three-year equivalents and these must be considered as preferable.
I would be concerned about possible interest rate spikes over the next few months and would be inclined to start searching now in case rates do jump upwards.
A remortgage can often take six weeks or more from start to finish so the timescale is not too far removed.
It may be that a free valuation and legal fees mortgage arrangement is appropriate. If this is the case, there will be no personal financial outlay at the start for Simon and Claire, which enables a no-loss switch to another deal if this becomes attractive.
Scott Richford is product marketing manager at Mortgage Talk
Simon and Claire should start looking sooner rather than later, as the average remortgage can take anything between four and 12 weeks, including the initial application, valuation, credit checks and so on.
This means that they should really get moving early, as it may be that, if they do delay, some of the current good deals on offer may be withdrawn.
At present, the market is showing some excellent longer-term fixed rate deals of five years’ duration, so their broker should be confident in providing them with a suitable product.
In order to proceed, their adviser would require their income details, their regular financial outgoings and, of course, the value of the property to enable them to choose a suitable deal.
It may be that, if there is some reasonable equity in their home, there may be some opportunity to capitalise on some of this, without a financial penalty, although they must seek expert advice on this point.
