Borrowers with mortgage products that contain fixed or discounted interest rates which were issued two to three years ago face a situation in which they must remortgage or face a huge rate shock this year. Such mortgages are due to revert to the lenders? Standard Variable Rates which can mean an increase of around two percent to the interest rates attached to the products. This can increase the monthly mortgage payments due by hundreds of pounds ? unaffordable to many households.



Home owners in this situation are therefore virtually forced to remortgage this year. Ordinarily this would lead to lenders offering all kinds of sweeteners to secure their business, such as reduced interest rates and low entry fees on their remortgages. Instead, due to the credit crunch, frontline lenders are reluctant to take on new business from most types of borrowers and are not offering incentives. In fact the situation is reversed with lenders pulling products from the market that were once suitable for remortgages and tightening the criteria on the mortgages that remain available.

In order to ensure that home owners secure a good deal on their remortgage ? or find a deal at all ? planning ahead is encouraged. Final mortgage offers from lenders are usually valid for several months meaning that borrowers can begin to search for remortgages, and even apply for them, months ahead of the time in which their current deal expires. Home owners should also not restrict themselves to mortgage brokers and should actively contact lenders by themselves to research products suitable for remortgages which may not be available through intermediaries. Additionally, home owners should check best buy tables on financial websites. It should be noted, however, that the products on top of the league tables can be extremely popular and may only be available for a short time.

Another tip for finding a good remortgage product is to reduce the loan to value ratio required. Mortgages that were one available with high loan to value ratios are disappearing fast which may leave some home owners in the lurch if they have not paid off some of their home loan. Existing borrowers should therefore attempt to reduce their mortgage balance before they apply for remortgages in order to increase their chances of securing a favourable deal.

Finally, borrowers should carefully weigh up the real cost of a discounted or fixed rate against a variable rate home loan. Remortgage products with favourable interest rates often come with high application fees so the borrower may not be better off over the term of the discount period due to the high entry fee. It may be worth paying a low entry fee for a tracker rate mortgage, for example, and taking on the risk of future interest rate rises. The current trend of the Bank of England Base Rate is downward and many analysts and brokers are predicting that it will remain historically low in the immediate future.