Remortgage or sell? what should you do when your fixed rate nears the end

The Bank of England has raised interest rates by a half point to 5% - bringing borrowing costs to the highest level since April 2008.

The latest rise comes with growing concerns over the mortgage market, with the average two-year fixed mortgage rate surpassing 6%.

More than 2.4m fixed-rate mortgages are set to expire by the end of 2024, and rates have soared as the Bank of England's attempts to cut high inflation have fed into lending deals. 

This article is part of our mortgage crisis series. If you are remortgaging or selling your property, our solicitors can help you understand the legal aspects of the process.

Navigating the housing market

The housing market is subject to various economic factors, including fluctuations in mortgage rates. In times of rising mortgage rates, homeowners often explore two options to optimise their financial situation: remortgaging and selling their property. 

Both options have distinct advantages, and choosing between them depends on individual circumstances and financial goals. 

Remortgaging your property

• Access to lower rates: Remortgaging can present an opportunity for homeowners to secure a new mortgage with a lower interest rate, reducing their monthly mortgage repayments. Shopping around for the best available rate when your fixed rate is nearing its end is essential, and using an experienced mortgage broker may help.
   
• Flexible repayment options: Remortgaging also allows homeowners to reassess and modify their repayment terms. Homeowners may choose to extend their mortgage term, resulting in lower monthly payments, or opt for a shorter term to repay their mortgage more quickly and potentially save on interest charges. This flexibility lets homeowners align their mortgage repayments with their current financial circumstances.
   
• Access to equity: Remortgaging provides an avenue for homeowners to release equity tied up in their property. By borrowing against the increased value of their property, homeowners can obtain funds for various purposes, such as essential improvements, debt consolidation, or investments. This can be particularly advantageous when interest rates are rising, allowing homeowners to tap into their property's value before potential market fluctuations occur.

A quick guide:

1. Assess your current mortgage terms, including interest rate and remaining balance.
2. Research and compare mortgage deals from different lenders.
3. Gather necessary documentation, such as proof of income and identification.
4. Arrange a property valuation or survey if required by the lender.
5. Complete the mortgage application and submit it along with supporting documents.
6. Receive a mortgage offer from the lender and carefully review its terms.
7. Engage a solicitor or conveyancer to handle the legal aspects of the remortgage.
8. Complete the remortgage process on the agreed completion date, including transferring funds and updating Land Registry records, which your solicitor will handle.
9. Set up new mortgage payments according to the agreed schedule and review insurance policies.

It's important to note that the specific steps and requirements may vary depending on individual circumstances and the chosen lender.

Selling your property

• Capitalising on property value appreciation: Selling a property during a period of rising mortgage rates enables homeowners to benefit from the appreciation in property values. As demand for property remains strong in the UK, especially in desirable locations, homeowners can take advantage of favourable selling prices. Selling at an optimal time can result in substantial profits, which can be used for various purposes, such as purchasing a larger property, downsizing, or investing in other opportunities.
   
• Elimination of debt: Selling a property allows homeowners to completely repay their mortgage, freeing themselves from long-term financial obligations. This debt-free status provides peace of mind and financial security, enabling individuals to make new decisions regarding their housing situation without the burden of monthly mortgage payments. The proceeds from the sale can be utilised for purchasing a new property outright or exploring alternative investment avenues.
   
• Adaptability to changing circumstances: Selling a property allows homeowners to adapt to changing personal or financial circumstances. It will enable individuals to relocate for job opportunities, downsize after the children have moved out, or invest in alternative assets. This increased flexibility empowers homeowners to align their living arrangements with their evolving needs and aspirations.

It is essential for homeowners to carefully weigh these benefits and consider their situations to make an informed decision that best aligns with their long-term financial goals and aspirations in the face of rising mortgage rates.

Contact our residential property solicitors

If you want to sell or remortgage your property, our experienced solicitors and conveyancers can guide you through the legal side of the process, making it as simple and stress-free as possible.

We are proud to be accredited under the Law Society's Conveyancing Quality Scheme (CQS), the recognised quality standard for residential conveyancing practices.

We have offices in Brighton, Eastbourne, Hastings, London, Uckfield, and Ulverston, and we assist homeowners locally and nationally.