Remortgage: When is the right time to “Deal”?

Published: 17/08/2011

Well over 22 lenders, competitive fixed rates, and only one question – Deal, or No Deal? As competition between the bankers continues at a ferocious pace, remortgaging is becoming more and more like an episode of Deal or No Deal; a strategic contest where the player must deduce the pinnacle point of their game to walk away with the best possible deal.

The Bank of England base rate has remained at the historic low of 0.5 per cent since September 2009 and, while what goes up must come down - or vice versa in this case – the previous threat of an imminent rate rise has all but disappeared.

In fact, following the Bank of England’s revised growth forecast last week, many experts are foreseeing rates cut even further to 0.25 per cent.

Such uncertainty is prompting homeowners to sit tight and wait for cheaper and cheaper deals.

Two and three year fixed deals are currently averaging 4.24 per cent and 4.74 per cent respectively while average five-year fixed rate mortgages have fallen below 5 per cent for the first time since 1988. Coventry Intermediaries have just launched a 3.49 per cent five year fixed rate deal, available up to 65 per cent loan-to-value with a £199 booking fee and an £800 arrangement fee, and experts aren’t expecting rates to stop there.

Michelle Slade, spokesperson for Moneyfacts said:

“With a rise in bank base rate looking unlikely in the short term, rates could fall further still.”¹

However, holding out for such an event comes with a high element of risk.

In a game of Deal or No Deal, as the player picks away at their “power five” – prizes worth £35,000, £50,000, £75,000, £100,000 and the £250,000 jackpot – advantage is handed back to the banker. It is a similar story in the game of remortgage, as Slade points out:

“Once a bank base rate rise becomes imminent rates will quickly start to rise and if borrowers don’t act fast they will miss out on these all time low rates.”¹

Similarly to a Deal or No Deal contestant, borrowers have to consider what is worse:

  • Jumping the gun, securing a deal and then finding out you could have had a better offer or,
  • Waiting it out for the big prize and walking away with a penny?

Guess it just depends on whether you’re a gambler at heart.

¹Mortgage Solutions (Aug 2011)

Content correct at time of publication

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