Should I remortgage my home?

Interest rates have sat at their historic low for over two years now, variable rate remortgages are the cheapest they have been in a long time and many people who took out two year fixed rate mortgages two years ago with the purpose of protecting themselves against interest rate rises will be wondering why they bothered.

Unfortunately, hindsight is a glorious advantage unavailable when making financial decisions like these, for if it was everyone would be extremely rich.

The biggest reason to remortgage is still to fix the interest rate on a customer’s remortgage, preventing monthly payments from increasing if the Bank of England base rate was to increase.

Predictions that the Bank of England base rate would increase have so far proved fruitless, and there are some experts predicting it won’t increase until 2014. As a result many are asking what the point of remortgaging is, with their current variable rate mortgages offering as lower monthly repayments as they’ve ever had to pay.

Whilst this is a valid point, there is still a chance the base rate could increase this year, if not early next year, and the low interest rates have allowed existing lenders to start a price war between themselves.

This price war has created some very cheap fixed rate and tracker rate remortgage deals, which customers can take advantage of.

Choosing whether to opt for a fixed rate or tracker rate mortgage really depends on the length of mortgage you are choosing to take out, and how much you can afford to pay.

A tracker mortgage will track the base rate, and over the next two years it seems unlikely that the Bank of England base rate will increase by very much, meaning a two year tracker mortgage will be very cheap initially, and is unlikely to increase by much over that period. A five year prediction is far harder to make, and anyone taking a five year tracker remortgage does risk the base rate increasing significantly in that time, making it more expensive than a five year fixed rate remortgage.

Fixed rate remortgages are also very cheap at the moment because of the price war and are still the most popular form of mortgage. These remortgages offer complete peace of mind that whatever happens to the Bank of England base rate, a customer monthly payment will stay the same.