The events of the past 24 months have prompted households up and down the country to reconsider their priorities. Not to mention, take a good look at their finances and make budget-conscious adjustments when necessary.
Data from the Mortgage Lending and Administration Return (MLAR) suggests that at the end of 2020, total outstanding residential mortgage debt in the UK was £1,541.4 billion. But what was particularly interesting is how more than 18% of the money lent to owner-occupiers by banks in Q4 that year was issued in the form of remortgage products.
Earlier in the year, remortgaging accounted for a whopping 37.8% of all mortgage loan activity in Q2. This meant that more people were taking out remortgage loans than relocation loans, buy-to-let loans or first-time buyer loans.
But why is it that in the face of unprecedented economic uncertainty, more people than ever before are remortgaging their homes? What are the potential benefits of remortgaging, and when is the right time to consider shopping around for a remortgage product?
Why Do People Remortgage?
The answer to the latter question is fairly straightforward. If there is any possibility you could get a better deal from a different lender, it makes perfect sense to switch.
This is particularly true for mortgage payers approaching the end of the introductory fixed-rate period. Prior to being automatically transitioned to a flexible rate product, consulting with an independent broker could pave the way for an exponentially more cost-effective deal elsewhere.
As for the main reasons why people remortgage, there are four primary motivations among UK homeowners seeking affordable remortgage products:
- To save money on their existing mortgage
Switching at the right time could lead to significant long-term savings. Competition on the UK lending market is ferocious, with lenders often willing to do what it takes to undercut their competitors. Whatever kind of rate you are currently being offered on your mortgage; there is every chance you could qualify for a much better deal elsewhere.
- Debt consolidation
Remortgaging can also be great for raising the kinds of funds needed to consolidate other debts. A remortgage can (with the right lender) attach a much more competitive APR than most comparable loans and credit facilities. By ‘rolling up’ several debts into one competitive remortgage product, it is often possible to make significant immediate and ongoing savings.
- Paying for home improvements
This is essentially where a mortgage payer uses the equity they have tied up in their home to raise money to conduct home improvements. The outstanding debt they have on their home is increased in the form of a larger mortgage, and the additional funds raised are used to perform the renovations. After which, they continue repaying the balance on their mortgage monthly, with no impact on their General Financial position of spending power.
- More agreeable terms and conditions
It is also far from uncommon for mortgage payers to find themselves completely disenchanted with their lenders at some point along the way. If you are simply dissatisfied with the terms and conditions of your mortgage, switching to something more flexible and accommodating makes sense. Remortgaging with the help and support of an experienced broker can be surprisingly simple, and yet can pave the way for a more agreeable and affordable product.
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