On the whole, this is probably a good time to switch mortgages. But it’s also important to proceed with great care.
We’ve all probably read about the likelihood of interest rates and, therefore, mortgage rates increasing gradually in the not too distant future.At the same time, recent noises from the Bank of England suggest that the economy hasn’t been expanding quite as quickly as was previously hoped. This, in turn, it is now said, means that interest rate rises look likely to be deferred for a little while yet.At the same time, they probably are just around the corner, so it’s important to take this into account and to plan ahead carefully.
A balanced approach is best. If your mortgage term is coming to an end soon and you want to re-mortgage – or if you think it’s worthwhile re-mortgaging and paying any exit fees anyway – it may be better to take a longer term view. Paying higher for a longer-term deal could pay off in the long run. But no-one knows exactly whether this will be the case, of course; thisis a market like any other and you strike the deal in today’s economy and live with the consequences.
But if it’s affordable and you can fix that affordable rate for the long term, then why not? This, at least, will bring you true peace of mind which is what good financial planning should be all about. And there are some good deals around. HSBC, for example, is clearly trying to capitalise on the fact that many customers want to grab lower and longer-term fixed deals while they can, but are deterred by the overall costs and hassle of switching. You can find out more here about HSBC’s new range of mortgages – some of which are at fixed rates of up to five years (though these rates are higher as we might expect, then the shorter-term deals).
Importantly, though, the new deals include no booking fees or standard valuation fees or any other fees that feel kind of “made up” by some providers! The company will also include standard legal costs for customers transferring in their mortgages. What this means overall, is that switching should be free as long as your existing mortgage deal is coming to an end anyway and, therefore, that there are no punitive exit fees to pay.
The most important thing is not to base your financial projections over a two-year period. Try, instead, to base the affordability of your mortgage on a much longer-term basis, acting as if mortgage rates were around double where they currently are. If you’re well covered on this basis, then you should be able to withstand any rate rises. You should also be able to afford a longer term deal which will help you sleep at night!