Remortgage rates have recently taken a positive turn, with the cheapest two-year fixed remortgage rates dipping below 5% for the first time since July. This decline marks a pivotal moment for approximately 1.6 million UK households nearing the end of their current mortgage deals.

Lenders like Yorkshire Building Society, Virgin Money, Bank of Ireland, and soon Barclays, are offering these competitive sub-5% rates. Despite the inevitable increase in monthly mortgage costs for many, these lower rates are set to soften the financial impact.

Current Trends and Options in Fixed Mortgage Rates

The Attractiveness of Five-Year Fixed Rates

Presently, the most advantageous deals are found in five-year fixed rates, with top offers around 4.59%. However, a significant portion of borrowers are leaning towards two-year deals, hoping for a decrease in interest rates when they remortgage next.

Expert Predictions and Market Forecasts

Analysts, including those from Morgan Stanley and Capital Economics, predict a potential decrease in the Bank of England base rate in the coming years. These forecasts indicate a potential drop to 4.25% by the end of 2024, and even to 3% by late 2025.

Spotlight on Current Best Deals

Virgin Money and Yorkshire BS Leading the Way

Currently, Virgin Money offers a standout two-year fixed-rate remortgage at 4.94%, with a 1% arrangement fee. Yorkshire Building Society matches this rate with a £1,495 fee. These deals are accessible to homeowners with significant equity in their homes.

Barclays Joining the Competitive Market

Barclays is set to introduce a two-year fixed remortgage rate at 4.98% with a £999 fee, targeting those with at least 40% equity. This move by Barclays is expected to spur further rate reductions across the remortgage market.

Options for Homeowners with Lower Equity

Challenges for Those with Less Equity

Homeowners with less than 20% equity face limitations, with remortgage deals generally above 5%. For instance, Yorkshire BS offers a 5.34% rate for those with only 10% equity.

Emerging Opportunities in the Mortgage Market

New Deals on the Horizon

Barclays is set to launch new deals aimed at home movers, including a two-year fix at 4.8% for those with a 40% deposit, and a 4.95% deal for those with a minimum 25% deposit. Industry experts anticipate that rates could drop below 4% by the year’s end, given the current trend.

Yorkshire Building Society’s New Offers

Yorkshire Building Society has introduced new rates, including a 4.69% five-year fixed rate for those with a 25% deposit and a 5.69% three-year rate targeting first-time buyers.

Advice for Homeowners Nearing the End of Their Current Deal

Preparing for a Payment Increase

Homeowners should prepare for a potential increase in monthly payments as they reach the end of their fixed-rate period. Experts advise calculating the potential rise and adjusting budgets accordingly. It’s also wise to start the remortgaging process early, potentially securing a new rate up to six months before the current deal ends.

Considering Standard Variable Rates (SVR)

Those close to selling their property or nearly paying off their mortgage might find it more suitable to transition onto their lender’s SVR, particularly if it allows for overpayments or mortgage clearance without charges.