Could remortgaging help save you thousands after Brexit?

While deals are thrashed out as the UK leaves the EU, what does Brexit mean for your mortgage? Here, Michael Usher, a mortgage expert at Michael Usher Mortgage Services, discusses the possibilities and expectations as we come out of Europe, and how remortgaging sooner rather than later could help save you thousands.

Brexit might have been on the agenda for a few years now, but that doesn’t mean anyone can tell you exactly what will happen once the UK has left the EU for good. However, what you can do is prepare by assessing your own finances to help mitigate any potential adverse effects on your income or mortgage repayments.

Before the referendum in June 2016, the Treasury predicted the average cost of a mortgage would increase by £1,000 a year. However, what happens with interest rates will be the marker for how repayments will fluctuate.

Unfortunately, there is no way of knowing whether these will go up or down because nobody can predict exactly how Brexit – deal or no deal – will unfold in the short or long terms.

The high probability is that in the short term, faced with the irregularity of what will happen when the UK leaves the EU, the markets will react and the value of the pound will decrease. In turn, interest rates will possibly be reduced to stabilise the effect this has on household incomes, but this depends on the Bank of England’s assessment of the situation at the time.

What we do know is that the Bank of England raised the base rate from 0.5% to 0.75% in August 2018, meaning there is a strong possibility that interest rates could rise. In fact, the Bank of England has suggested this might be the case in the long term. Therefore, a fixed-rate mortgage is something you might want to consider investigating so you know precisely how much you will be paying each month.

If you already have a fixed-rate mortgage, you will be making regular payments each month that will remain unchanged until the fixed-rate term expires.

Depending on your provider, and the terms of your agreement, this might transition to a higher percentage fixed-rate for the remainder of the term or to an advised percentage above the Bank of England base rate. If the base rate significantly increases, then the knock-on effect is so will your mortgage repayments. Therefore, it is worth making a note to review your mortgage, check the expiry date and investigate alternative providers a couple of months before your fixed-rate ends to ensure you get the best possible deal and aren’t overspending on repayments when it transfers.

If you’re concerned about what will happen with interest rates and prefer to know precisely where you stand with your monthly outgoings, but don’t already have a fixed-rate mortgage, then switching could be ideal.

Bear in mind that, if you are remortgaging your home, it is also possible to release funds from any equity you have in the property at the same time and add it to the mortgage amount. However, this will depend on various qualifying factors, including the length of time remaining on the mortgage, whether you can increase the term and whether you can afford the repayments. However, before making any commitments you should always consult a professional, such as an independent financial advisor.

Whatever the outcome of Brexit, reviewing your personal circumstances will go some way towards offering you control over your finances.