Give your mortgage a makeover

Esther Shaw / 30 January 2017

Review your mortgage borrowing and you could save money.

With the New Year well underway, now is the perfect time to review your mortgage borrowing and to check you are on the best rate you possibly can be.

With the base rate frozen at an all-time low of 0.25 per cent, deals are at rock bottom, and fixes are looking particularly competitive.

By making the move to a cheaper home loan, you can potentially shave hundreds of pounds off your monthly repayments.

In fact, recent figures from LMS show that one in 10 people who remortgaged in August managed to save more than £500 a month.

Given your mortgage is likely to be your biggest single outgoing, this could make a real difference to your finances in 2017.

Five tips to pay off your mortgage

Don’t sit on your SVR

This call to action is especially important for the estimated three million people in the UK currently sitting on their lender’s standard variable rate.  This is the rate you revert to at the end of a fixed-term deal.

An SVR is usually costly, and if you are on one, this means you are probably paying way over the odds on your mortgage.

At the same time, if you are still on an introductory fixed deal, but coming to the end of the term, you should also start looking at your options. This will avoid you slipping on to your lender’s SVR without realising it.

How low have rates fallen?

The rates on mortgages have plummeted to rock-bottom, and you can currently get a two-year fix for less than 1.5 per cent, and a five-year fix for less than 2 per cent.

At the same time, with high numbers of remortgage applications being accepted in recent months, your chances of approval are very good.

How to remortgage in later life

How long to fix for?

While five-year fixes are generally more expensive than their two-year equivalents at present, lots of homeowners are opting for slightly longer-term certainty at a time of economic and political uncertainty.

The advantage of a five-year deal is the fact you have the peace of mind of knowing you are locked in at a low rate for longer. You also won’t have to pay remortgaging costs again for quite some time.

Big savings up for grabs

If you are thinking about looking for a better mortgage offer, you could potentially save a significant sum in the process.

In fact, figures from Moneyfacts show that if you opted for a rate similar to the average two-year fixed-rate of 2.31% – instead of staying on the average SVR of 4.62 per cent – you would be £2,232 better off after just one year.

Equally, by using the extra saved to overpay your mortgage, you could also significantly reduce the length of your mortgage term.

How do buy-to-let mortgages work?

Take action now

It’s also worth noting that even if you are still a few months away from your current deal ending, it is worth securing a rate now for the future, as mortgage offers are valid for as long as three – or even six – months.

Taking action sooner rather than later is especially important given the speculation that the first rate rise in a very long time could be on the horizon – and could even be this year.

If a rate rise does happen in 2017, this could significantly increase the amount you have to repay on your mortgage each month – so it makes sense to move to a cheap fixed deal now. 

Next article: Securing a mortgage when over 50 >>>

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.