The beginning of a new year, when not much is going on, is a good time for taking a long, hard, critical look at your finances and the biggest outgoing of them all – the mortgage. This is particularly important this year when finances are likely to be a little tight.
First, consider your existing deal. If you are on a fixed-rate mortgage or base-rate tracker, and would incur an early redemption charge for switching to another deal, it may be worth staying put for now. Make a note when your current deal ends – if it is at some point during this year, you will need to take action. Diarise it; about six months before that date, book at an appointment to see an independent finance specialist such as Anderson Harris, to talk through your options. New deals can be secured up to six months before you actually take them out, depending on the lender, so leave plenty of time to find a new one.
If you are on your lender’s standard variable rate (SVR), you need to decide whether to stay put or remortgage. Much depends on the SVR you are paying, your income and how much equity you have in your home. If you are paying more than 3.5 per cent, and have at least 25 per cent equity in your home, you should find a cheaper fix or tracker, so should consider remortgaging. Your lender’s SVR will not get any cheaper: indeed, it will only rise when base rate starts to increase and may do so quickly.
Those who are on really cheap SVRs or ‘go to’ trackers, may want to stay put for now. If you do, it makes sense to use money ‘saved’ each month to reduce your mortgage further.
If you require interest only, have complicated income streams, or are an ‘older’ borrower, seek independent advice. You might find it tricky to source a mortgage on your own but we might be able to help, particularly if you qualify for finance from a private bank.
The important thing is to take action – even if it is only to reaffirm that you are on the right deal for your circumstances at the present time. There is no room for complacency: while forecasters can’t agree when interest rates will rise, they will at some point. The smart borrower will take advice if they are unsure and take time to prepare for whatever 2013 may have in store.