Is it too late to remortgage your home?

Interest rates for new mortgages are continuing to rise but remortgaging your home can still be worthwhile under certain circumstances, says FVB de Boer financial consultant José de Boer.

In many cases, you may be too late, and this is definitely the case if you took out a mortgage in the past five years or so, when rates were lower. A 100 percent mortgage fixed for 10 years will now cost you at least 3,2 percent, and that is double the rate we were seeing at the start of the year. Nevertheless, there are still some circumstances in which it might be worth to remortgage your home.

When should you consider remortgaging?

If you currently pay a higher rate and you still have a few years to go before the fixed period runs out, it may still be cost-effective to switch to a new mortgage before interest rates rise even more. After all, if your current rate is up for renewal in a couple of years, theoretically, rates will be even higher by then.

You might also consider making the change if you are coming up to the age of 57 and want to fix your interest rate for a longer period or extend your mortgage. When you turn 57, banks want to know everything about your retirement income when deciding whether or not to give you a new loan – and when I say everything, I really do mean everything. So, if you can avoid the third degree by doing it now, it makes sense.

Need to make renovations in your home?

It is also still worth remortgaging if you want to release some of the capital tied up in your house to carry out renovations – something which more and more people have been doing since the number of homes on the market shrank.

If you have the financial flexibility and want more space, for example, now might be a good time to add an extension to your home, to give you a home office or a bigger kitchen. It could also be worth investing in increasing your home’s energy efficiency, by installing double glazing or even a hybrid heat pump, as the government is encouraging us to do. In fact, the majority of new mortgages being taken out at the moment are remortgages to fund renovations or extensions.

You may also be thinking about buying a holiday home, and again, if you can afford it, then it might be smart to do so sooner rather than later. Many people have a lot of capital tied up in their property and it still makes financial sense to release some of it, if you have a major purchase in mind.

The right time to remortgage

Of course, one of the problems of rising interest rates is that no one has a clue what is going to happen. The war in Ukraine, EU fiscal strategy and soaring inflation will all have an impact on interest rate developments in the coming months. Economists think rates will continue to rise, albeit more slowly, but concrete forecasts are few and far between.

If you are a gambler, you can always wait and see what happens – and who knows, waiting a little longer could pay off. But unless you are paying a high rate of interest now, or want to remortgage with a specific purpose in mind, it’s best to sit tight. You may have missed the boat this time, but another one will probably come along sooner than later.

Thinking about remortgaging your property? The team at FVB de Boer are on hand to provide expert advice and answer any questions you might have.