Don’t be over-cautious - remortgage sooner rather than later

January 4th, 2008

Like many homeowners, I have been watching the predictions regarding interest rates and economic change during 2008 with great interest, particularly the endless speculation over the future of the housing market. Many economists are predicting as many as four interest rate drops during 2008, which will relieve some of the pressure on banks’ access to funding, which should in turn make borrowing more affordable for consumers. However, some banks are hinting that the on-going problems caused by the sub-prime mortgage crisis in the US will result in their being unable to pass the interest rate drop onto consumers – which is not good news for mortgage holders, particularly those coming to the end of their fixed rate deals in the next few months.

My advice for homeowners in this position is to remortgage sooner rather than later. Indecision may result in your missing out on the best deals, as many lenders may have already pulled their best products from the market by the time it is clear exactly what will happen. Possibly the best course of action may be to consider the range of tracker mortgages available, as these will allow you to take advantage of base rate drops to a greater degree than those with other ‘safe’ mortgage products. When interest rates are predicted to rise, tracker mortgages are seen as a less desirable option, due to their inherent instability; but when rates look set to drop, they can prove one of the most competitive products in the market. At the moment one of the most attractive products available is the Lloyds TSB 2-year tracker; it is also worth speaking to an independent mortgage advisor for impartial advice tailored to your requirements – many brokers also have access to exclusive reduced rate options that aren’t available directly from the lender.