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Time to review your mortgage?

28th February 2019

Open a newspaper, click on the news, scan social media and it won’t take long before the subject of Brexit comes to the fore. So much so that it almost seems as though Brexit has taken over our lives and, in some cases, paralysed decision-making under the weight of ‘what ifs’.

But there are times when we can’t afford to wait for certainty, when doing nothing is not a viable option. For example, when a fixed rate mortgage term comes to an end, borrowers may well find that they have been switched to the lender’s standard variable rate. Not only might this represent an increase on the interest rate charged over the fixed rate term, it also leaves borrowers open to any future changes in interest rates introduced by the Bank of England. Interest rates can go down as well as up. Economists are currently split on expecting to see a rise or fall from the current base rate of 0.75%. A lot could depend on the final outcome of Brexit.

With further interest rate rises or falls on the horizon should borrowers then look to enter into another fixed rate mortgage term and if so, for how long? Or should they choose a variable rate with no early repayment charges? Well, that will depend not only on current individual circumstances but also on how personal circumstances may have changed since the previous fixed mortgage was taken out as well as on future expectations and prospects.

For example, given the current uncertainties it may be tempting to opt for a ten-year fixed rate mortgage in order to have peace of mind over what monthly repayments are likely to be. However, it is worth noting that fixed rate mortgages can carry early repayment penalties. Fixing in the long-term may not be the optimum solution therefore if borrowers are looking to move in the near future or who would like to have the flexibility of making additional repayments to reduce their borrowing. Having said that, long-term fixes aren’t necessarily ruled out in those circumstances, but the choice of lenders may be restricted.

Similarly, those whose personal circumstances have changed since they took out their previous mortgage may find that their options are restricted by a change in affordability rules. On the other hand, those whose loan to value ratio has improved may well find that options are opening up.

Commenting on the choices faced by those whose fixed-rate mortgages are coming to an end, Thompson Jenner Financial Services specialist mortgage adviser Philip Dalley said “When reviewing mortgage options, it is important to ensure that the solution best meets an individual’s requirements. The interest rate is only one factor with charges, flexibility and personal circumstances all playing their part.”

 

 

If you would like to find out more or meet to discuss the financial services which we are able to provide, please contact Philip Dalley at either our Exeter or Exmouth office on 01392 258553 or 01395 279521 to arrange a free initial meeting. Philip holds the Advanced Mortgage Qualification and is a member of the Society of Mortgage Professionals.

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