Homeowners who want to secure a competitive rate for their next mortgage may need to “introduce equity” in order to do so, it has been suggested.
According to Al Elliot of the Homeowners Advice Centre, those whose current mortgage deal is coming to an end have two options available to them.
“[Borrowers] can revert to standard variable rates (SVR) or try to remortgage,” he explained.
However, he noted that “the jump won’t be quite as big as borrowers expected”, for those who do opt for an SVR morrgage due to the falling base rate, which could make such a finance package attractive to those who are looking to become debt free.
He also warned that lenders are not necessarily going to pass on the interest rate cut, as they may risk “risk a cash-flow crisis” by reducing borrowers’ repayments by too much.
Research conducted for Cheltenham & Gloucester found that 32 per cent of people would opt to pay a higher rate of interest on their current mortgage than risk rejection from another lender.
By Tom Musk