What to do if you need to remortgage

Homeowners are facing higher mortgage costs as interest rates rise. Approximately 700,000 fixed-term mortgage deals are ending in the second half of 2023, and borrowers coming to the end of their fixed term will likely encounter higher costs when they switch.

The Bank of England's base rate has increased thirteen times, reaching 5% from 0.1% in December 2021. Mortgage rates had been dropping but started increasing in May due to concerns about further base rate hikes.

Moneyfacts data shows that current mortgage rates are significantly higher than two years ago, with the cheapest interest rate at around 5% for a five-year fix.

To navigate this situation, homeowners should assess their options when remortgaging. If close to the end of a fixed term, they should start shopping around for a new deal. If still within a fixed term with more than six months remaining, it may not be advisable to switch mid-term due to potential charges imposed by the lender.

Homeowners on tracker mortgages may be paying more than before and should seek advice based on their specific circumstances. Those on standard variable rate mortgages should switch to alternative deals as soon as possible.

To get the best remortgaging deal, homeowners should be proactive and take several steps:

1) Determine when the fixed term ends, as moving to the lender's standard variable rate is usually more expensive.

2) Avoid remortgaging mid-term to prevent charges that may outweigh financial benefits. 3) Assess the loan-to-value ratio, which may have improved due to increased home equity or changes in property value.

4) Consider a product transfer with the current lender, but also research other lenders to find the best rates.

5) Conduct thorough research and seek expert advice to identify suitable mortgage options.

6) Choose the right mortgage term based on personal circumstances and financial goals.

7) Pay attention to upfront fees when comparing mortgage deals, as they can significantly impact the overall cost. If unable to secure a new mortgage, homeowners should seek financial advice, consider other providers, or launch an appeal if there was an error in the application.

What to do if you can't get approved for a mortgage

You may find it a struggle to get accepted for a new deal when you come to remortgage – this will usually be the case if you fail stricter affordability tests brought in after you bought your home. 

Some of the most common reasons for failing affordability tests include having a drop in income, being self-employed, having a poor credit rating and going into negative equity. But there are steps you can take if you've been turned down for a mortgage or remortgage. 

Bear in mind that if you don't take action, you'll be put onto your mortgage provider's SVR. These tariffs tend to be significantly higher than the rates on other types of mortgage.

Get financial advice

Speaking to a qualified adviser can help you understand why you may have been turned down for your mortgage, and help you plan what to do to get accepted.

This can include checking over your application for any mistakes or missing information, as well as steps to help you pay off any debts and improve your credit score.

Try another provider 

There's no guarantee you'll get the best deal with your current provider, so shop around – just make sure you don't end up with multiple 'hard' credit checks, as this could negatively impact your credit score.

Launch an appeal

If you've spoken to an adviser, and still can't decipher why your application was rejected, you can appeal the provider's decision.

This process tends to be complex and may not be the best course of action unless there was an error on your application. Otherwise, an appeal is unlikely to change the outcome of the lender's decision. You should therefore only consider this option if you know there was important information that wasn't considered by your lender.

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