Remortgaging in 2024: Should I fix my mortgage now?

The Bank of England chose to cut base interest rate from 5.25% to 5% in August, bringing hope to homeowners that mortgage rates could fall too. So is now a good time to find a new mortgage deal?

Almost 700,000 fixed rate deals will come to an end in the second half of 2024, according to trade body UK Finance. While mortgage rates remain significantly higher than two years ago, some of the UK’s biggest lenders have started to reduce theirs. How far could they fall?

In this article, we set out:

• Is now a good time to remortage?
• Can remortgaging save me money?
• Should I get a two or five-year fixed rate mortgage?
• The advantages of remortgaging now
• What to do before remortgaging

Read more: When will mortgage rates fall?

What’s happening to UK mortgage rates?

Mortgage rates have remained largely unchanged over the last month. However, fixed rate mortgages are higher than they were in February, according to financial information provider Moneyfacts.

Since then, the average two-year fixed rate mortgage has risen from 5.56% to 5.91%, while the average five-year fix has risen from 5.18% to 5.49%. 

However, there is some good news for mortgage holders.

Some of the UK’s biggest lenders have begun reducing mortgage rates after August’s base rate cut. The Bank of England was originally expected to cut the base rate when inflation dropped to 2% in May, down from a sky-high 11.1% in October 2022. However, the base rate remained on hold at 5.25% until August 2024.

Analysts now expect the Bank to cut rates in the next few months as inflation remained steady at 2% in June. The average forecast shows rates at 4.5% by the end of the year. You can read more about how interest rates affect inflation.

Andrew Montlake from the broker Coreco said: “Mortgage rates had already priced in an expected cut, so borrowers should not expect a dramatic fall in rates, but the trend is still downwards. The bigger lenders such as HSBC, Barclays, and Santander had already started to reduce rates a little. We should see more lenders follow suit now that the Bank has cut the base rate.”

Even so, mortgage holders who took out a deal several years ago face an increase in repayments. Rates are significantly higher than in December 2021, before the Bank of England raised the base rate from its record 0.1% low:

• Back then the average rate on a two-year fixed-rate mortgage was 2.34%
• While a mortgage fixed for five years charged 2.64% on average

But just because mortgage rates are higher than they were doesn’t mean it’s a bad time to remortgage.

Is now a good time to remortgage?

If you’re sitting on your lender’s standard variable rate (SVR) or coming towards the end of a fixed-rate deal, it may be a good time to remortgage. 

There are about 800,000 homeowners who’ve been languishing on their lender’s SVR for six months or more and could save a substantial amount by remortgaging, according to the Financial Conduct Authority (FCA). When your mortgage deal comes to an end, you’ll usually move onto your lender’s SVR automatically unless you remortgage. The average SVR is currently 8.17%, according to Moneyfacts, which is much more expensive than average mortgage deals on the market. 

Mortgage rates are predicted to fall this year, so it’s worth looking into what deals are available. “I expect we may see a 3.99% five-year fix by the end of this year,” said Montlake. He said he expected two-year fixes may be around 4%  by the end of 2024.

But is it better to fix now or wait and take a punt on rates falling further?

Can I fix a new deal before the end of my current deal?

You can lock in a new rate if your fixed deal is coming to an end within the next six months. Many lenders will allow you to do this without having to commit to it (as long as it has not started). This means that if mortgage rates continue to fall, you can drop that deal without being charged and search for a new one. Conversely, if rates rise, then you bagged yourself a better deal six months before.

Locking in a deal before your current one expires also means that you won’t risk rolling on to your lender’s costly default rate.

Should I move on to my lender’s standard variable rate and wait?

You might be tempted to roll on to your lender’s SVR at the end of your current fixed deal and wait for mortgage rates to fall further. However, this would be a gamble as no one knows for sure what will happen next to rates. 

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Sitting on your lender’s SVR while you wait for rates to fall could be costly. While interest rates are expected to fall, nobody knows exactly when this will be and you could be waiting a while, making much higher payments in the meantime.”

For example, with a £250,000 mortgage over a 25-year term, waiting six months on the average SVR at 8.17% will cost you £1,957 a month, or a total of £11,748.

If you borrowed the same amount on a two-year fix at 6%, you will have paid £1,611 a month, which over 2 years is £38,664. If you lock into a two-year fix at 5%, you will have paid £1,461 a month, which is £35,064 after 2 years.

Should mortgage rates rise in six months, you could end up paying even more.

There is no way of knowing the direction in which mortgage rates will go, but lenders factor in interest rate predictions when pricing their fixed rate mortgages and the expectation is that the base rate will fall.

See what mortgages might be available to you with our comparison tool.

So, should I fix my mortgage?

You might want to fix your mortgage if you like the certainty of knowing how much is coming out of your account in mortgage repayments each month. 

Chris Sykes from mortgage broker Private Finance favours locking into a fix if you’re looking for a new deal. He said: “Lenders have been pricing in expected reductions in base rate, so people can often get a cheaper product than going with a variable rate, and that certainty of saving is extremely attractive for most people.”

However, the bottom line is that you need to do the maths and decide on the best option for you. If you don’t mind uncertainty and aren’t keen on being tied to a fixed deal, a tracker mortgage is an option. Harris said: “Trackers appeal to those looking for flexibility, enabling borrowers to drop into a fixed rate without penalty when they feel the time is right to do so if they’re comfortable with that.”

Remortgagers can lock in a rate six months before their deal is set to expire, and move to another deal with that lender if rates go down.

It’s unlikely to be a good idea to switch until your mortgage deal is about to come to an end. You could end up forking out for early repayment fees. We explain more on the risks of remortgaging early.

If you want to remortgage early, make sure there are no exit fees or early redemption penalties. These could be thousands of pounds.

It is worth speaking to your current mortgage provider to see if a product transfer would be cheaper. This is where you stay with your existing lender but move on to a different mortgage. It might also be easier than switching to a new provider, as you will usually be able to forgo the usual affordability checks.

Consider speaking to a mortgage broker to give you an idea of the best deals or check out our free mortgage comparison tool.

How long should I fix for?

If you have decided that you want to get a new fixed rate deal, the next question you need to consider is how long to fix for.

Should I get a two or a five-year fixed rate mortgage?

It’s currently cheaper to lock into a five-year fixed mortgage than a two-year deal, based on average rates. This has been the case since October 2022, according to Moneyfacts. In July 2024:

• Two-year fixed rate mortgage = 5.91%
• Five-year fixed rate mortgage = 5.49%

If you lock into a five-year fixed rate mortgage rather than a two or three-year fix, you will have certainty for longer and will be protected from potential future mortgage rate increases. The flip-side is that, if mortgage rates continue to fall, you will be stuck paying a higher rate. 

Harris said: “A two-year fix looks the right call with mortgage rates expected to continue on a gradual decline as interest rates reduce. But for those who can’t afford to be wrong, a five-year fix or even longer is worth considering.”

Remember, though, if your plans change and you end up moving, you will usually need to fork out for early exit charges unless it’s a portable deal.

Unfortunately, we can’t predict the future. So when deciding whether you should lock into a mortgage for two or five years, you need to decide based on your individual circumstances.

Of course, you could get a longer fix. Here we explore the pros and cons.

What are the advantages of remortgaging?

When a fixed, tracker or discounted mortgage deal ends you no longer benefit from a preferential rate. Instead, you will automatically move onto your lender’s more costly standard variable rate (SVR).

So one of the main reasons that many people choose to remortgage is that they might be able to save money by switching to a cheaper deal.

You may also be able to do this with a product transfer where you switch to a different deal with the same lender.

If you took out a two-year fixed mortgage rate before July 2022, for example, at the average rate of 3.74%, the repayments on a 25-year mortgage deal of £250,000 would cost £1,283 a month, according to Moneyfacts. 

If you sat on an SVR of 8.17%, with the same loan size, it would cost £1,957 a month. That’s £674 extra each month or £8,088 in additional mortgage repayments a year.

Another advantage of remortgaging might be that you can also ask to borrow more money to carry out home improvements or pay off more expensive debts such as credit cards. It is important to consider that in the long term you could end up paying more back in interest.

You can also lower or increase your mortgage term when you remortgage if you meet the bank’s eligibility criteria. Find out more about how soon you can remortgage here.

What should I do before remortgaging?

There are a number of things to do and consider before you remortgage or get a product transfer:

• Get planning three to six months before your current deal expires
• Smarten up your credit file (read how to increase your changes of getting a mortgage)
• Find out how much you can borrow based on your earnings and circumstances now, not when you first took out the mortgage
• Scour the market and lock into the best deal (you might be able to do this up to six months before your old deal expires)
• Consider speaking to a mortgage broker for more guidance, especially if you are self-employed or on a variable income
• Check for any early repayment charge or exit fees

Easy ways to get approved for a mortgage

There are some quick wins you can do now that will increase your chances of being approved for a mortgage. These include:

• Get on the electoral register for your current address
• Reduce unnecessary outgoings like subscriptions or memberships. You will have more disposable monthly income should you need to pay for an unexpected expense. Your lender will look favourably on this.
• Choosing a five-year fixed mortgage rate can improve your chances of passing a lender’s affordability checks. Banks often use a more lenient calculation when working out if you can afford the annual or monthly repayments on a five-year remortgage deal.

Find out more and compare the best remortgage deals.