What will you choose if you need to remortgage?
October 13, 2008
When choosing a mortgage product it is very important that you go for a mortgage that is going to prove suitable and save you money wherever possible, as your mortgage is a daunting long term financial commitment. In the past choosing a mortgage was relatively straightforward. If interest rates were low and were more likely to go up than down in the future most people went for a fixed rate mortgage to protect the lower repayments in the event that the base rate went up. In cases where the interest rate was quite high and the most likely movement would be downwards people have opted for a base rate tracker, so that their repayments would fall when the base rate went down.
However, industry officials have said that in the current financial climate many people looking to remortgage have hit a real dilemma, because there are so many mixed message with regards to which direction the base rate will go in, or whether it will change at all. A mixture of soaring inflation and stagnant economy, known as stagflation, means that the Monetary Policy Committee and the Bank of England have a real challenge ahead of them when it comes to setting the base rate, and this is making it difficult for consumers to decide which product to opt for if they need to remortgage.
For the last two MPC meeting there has been a three way split amongst committee members, with one voting for a rise in the base rate, one voting for a fall in the base rate, and the remainder voting for the base rate to remain static. However, despite the soaring rate of inflation the Bank of England has recently hinted that it would be prepared to cut the base rate again due to the state of the economy, and many officials have now changed their predictions from the base rate remaining at 5% for the remainder of this year to there being a chance of a further cut before the year is out.
Officials have warned that it is important for consumers not to take a tracker mortgage unless they are able to cope with increased repayments, as there is so much uncertainty about what could happen with the base rate and if interest rates are increased those with tracker mortgages will have to make larger monthly repayments. The benefits of taking out a fixed rate mortgage are pretty obvious - it means that if the interest rate does go up you won’t be hit by higher repayments, which means increased financial stability. However, on the downside if the interest rate does fall, which many officials think is likely, then you will be stuck with making far higher repayments than you would have with a tracker rate mortgage.
- Should you remortgage or just take out a secured loan? If you are a homeowner and you are looking to raise money against the equity in your home, there are a couple of routes that you may be able to take depending on your needs
- Halifax increases rates for new borrowers The Halifax has increased its interest rates on mortgages for new borrowers after making alterations to interest rates for the twentieth time since the start of the year. Over twenty of its mortgage products will
- Brokers report on new remortgaging trends A number of mortgage brokers have recently reported a new trend with consumers that are looking to remortgage. According to some mortgage brokers many of those that are coming to remortgage are opting for longer
- Difficult decision for those wishing to remortgage A recent report has shown how many people that are planning to remortgage either to get a better deal or because they are coming off cheap fixed rate mortgages may now find it difficult to
- Low fee mortgages from Abbey for those with sizeable deposits Over recent months a number of lenders in the UK have increased the mortgage arrangement fees on their mortgage products, and this has seriously affected the ability of many people to afford to take out
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