In Depth

Remortgage now and save £40,000

Borrowers might be advised to look beyond the cheapest two-year fixes

Mortgage rates are sitting at all time lows, making it a great time to remortgage and cut thousands off your home loan bill.

Several lenders are now offering mortgages with interest rates of under one per cent. As a result 85 per cent of people who remortgaged in September reduced their monthly repayments, according to conveyancing firm LMS.

“Annual repayments have fallen again and mortgage rates are at their lowest-ever level” says Andy Knee, chief executive of LMS.

“For those homeowners willing to remortgage, there remains plenty of incentive to do so and many could still benefit by remortgaging onto deals with lower interest rates and repayments. Reducing monthly payments is something that will be important for many as inflation increases and the price of everyday essentials rise.”

The savings on offer are certainly worth the effort of remortgaging. Three years ago, the best fixed rates were around three per cent. On a £150,000 25-year mortgage that would mean monthly repayments of £711 and a total interest bill of £63,358.

Now the best buy fixed mortgage is offered by HSBC and charges just 0.99 per cent interest for two years. That would cut the monthly repayments on that £150,000 mortgage to £564 and cut more than £40,000 off the overall interest bill to £19,298.

However, one broker is warning people not to be tempted by rock-bottom rates on two-year fixed mortgages as they could have a sting in their tail.

“Two-year fixed rates are ridiculously cheap at the moment and I can see why borrowers would be tempted,” Alistair Hargreaves, of mortgage broker John Charcol, tells The Daily Mail.

“But I really think it will prove to be a false economy. In two years Britain could be a very different place and borrowers could very easily find that they end up stuck with their lender on a much higher rate because they no longer qualify for a mortgage elsewhere.”

Hargreaves thinks people should look to longer fixed-rate deals instead in order to protect themselves during Brexit uncertainty.

“I definitely think criteria are going to tighten up in the run-up to Brexit and that could leave a lot of people who take cheap two-year deals now short of options when they come to remortgage,” he added.

Instead, you could go for a longer five- or even ten-year fix. Just make sure you understand the implications of a long-term fix. Check if you’ll have to pay early repayment charges if you want to move home, or can you take your mortgage with you.

The best rate on offer is 1.93 per cent from Yorkshire Building Society fixed for six years. Or, if you are planning to stay in your home for the long-term, Woolwich is offering a fixed-rate 10 year mortgage at 2.49 per cent.

Alternatively, if you aren’t sure what the future holds take a look at tracker mortgages. These too are at all-time lows and offer more flexibility as the early repayment charges tend to be far lower than on fixed-rate deals.

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