There are so many mortgage products and rates out there in today’s market that it can be hard to decide which one is best for you. Although the interest rate is a key decider when looking to remortgage, it’s crucial to remember that the interest rate is not the only factor to consider. In this article we will consider why the lowest mortgage rate does not always make for the best deal, and what other factors you may need to take into account.

First things first…

Mortgage rates in the UK are not only determined by the mortgage provider, but are also significantly influenced by the Bank of England, which decides the ‘base rate’. The base rate is the rate mortgage providers are charged to lend money to customers, so when this changes, the mortgage rates may change too (it’s advisable to keep an eye on UK interest rates if you are considering remortgaging - if on a high rate it may be worth switching to a lower rate, but there may be fees).

Why remortgage?

Remortgaging basically means to switch your existing mortgage for a new one, without moving to a new home. You may wish to remortgage for added security, for example if you think a better rate is on offer, helping you save on repayments; or to raise money to pay for home improvements, or you may simply have reached the end of a fixed-rate mortgage. If the latter is the case, your mortgage will possibly revert to a standard variable rate, which can be higher than your fixed rate. Remortgaging could help you find a better deal.

When is best to remortgage?

If your current mortgage deal is nearing its end, you could consider looking at remortgaging three to six months before your existing deal comes to an end, allowing you to make a nice smooth transition from one deal to another.

However, it’s important to consider current deal’s exit fee before you start calculating your new mortgage deal. However, don't be too put off by this figure - the amount you could save from remortgaging will possible make up for this one-off fee, but it’s important to keep in mind so that you can budget correctly.

What other fees should I watch out for?

In addition to your current lender’s exit fees, there are numerous other fees to consider when remortgaging. You should pay particular attention to mortgage arrangement fees. This is the fee that you would be required to pay your new provider. Many remortgage deals that appear very cheap on first glance can often carry arrangement fees of anything up to £2,500. This might not be too much of a drawback if you have a larger mortgage, but if your mortgage is small, it might outweigh the benefit of your lower monthly payments.

What type of mortgage is best for me?

A key decision you’ll need to make when remortgaging is the type of mortgage which best suits your circumstances. It’s important to consider your circumstances, as well as the current economic climate, when making this decision. A fixed-rate mortgage gives you security that your rate will not differ, no matter whether rates go up or down during a fixed period at the start of the mortgage. You would generally pay more for a fixed rate than a variable rate, but you might benefit if the Bank of England puts its rates up during this fixed term.

Tracker mortgages go up and down with the Bank of England base rate. For example, a tracker rate that is base rate + 2% means that your interest will always be 2% above the base rate, increasing and decreasing as and when this rate changes.

If taking out a variable rate will save you £500 a year in interest rates, but you’re going to lose sleep every time the rates go up, then it might not be the option for you. Always take into consideration your personal circumstances and how much you can afford to pay, or speak to a broker.

What about the length of my mortgage term?

Another key factor to consider when remortgaging is the length of the new mortgage deal. If you take on a two-year term because it has a lower rate than a five-year, you may well make some savings. However, you might lose out if, in two years, rates have gone up and you have to renew again to a much higher rate.

Remember, it’s not always as simple as what may be the cheapest rate, because what may be the cheapest rate now might not turn out to be the cheapest down the line.

I’m confused - who can help?

Although there is plenty of information out there about mortgage rates, it’s wise to consult a professional before making any decisions. Mortgage brokers have access to mortgage information from a wide range of lenders, not just the big banks. This widens your options, increasing the chances that you find the most suitable deal for your circumstances, not just the one that seems the most appealing upon first glance.

A lot of people consider their circumstances first and then approach a mortgage broker armed with a bank of questions. This could help them feel much more confident in the broker being able to recommend a product that fits their circumstances.

Eddison Wells is a mortgage brokerage - with a wealth of knowledge, their team is ideally placed to provide a comprehensive range of financial products. Providing the highest quality service at the most affordable price is a prerequisite and a firm ethos - call an Eddison Wells Mortgage Adviser now on 0800 808 9981.