Across the UK, lenders have started to reduce remortgage rates, creating new opportunities for homeowners looking to refinance and making life a little easier for buyers and movers too.
With competition heating up among lenders, some of the latest fixed-rate deals are now at their lowest levels in months. So what’s driving this change, and what could it mean for your next move?
Why remortgage rates are dropping
Over the past week, several major lenders have announced rate cuts or have repriced existing mortgage products. This shift is being driven by a mix of factors.
Firstly, market expectations around future interest rates have softened. Many analysts now believe the Bank of England may reduce rates in the coming months, which gives lenders more confidence to offer cheaper products. Secondly, inflation has eased compared to recent peaks, reducing some of the pressure that previously kept borrowing costs elevated. Finally, after a period where many people chose to “wait and see”, lenders are now competing harder for new business. That means keener pricing and a wider choice of products.
Some of the most competitive remortgage rates today, particularly for borrowers with a lower loan-to-value (LTV), are now around 3.65% for a two-year fix (often with a fee attached). Five-year fixed deals have also become more attractive, offering stability at rates we simply didn’t see a year or two ago.
What this means if you’re remortgaging
If your current mortgage deal is ending soon, or you’ve already rolled onto your lender’s Standard Variable Rate (SVR), falling remortgage rates could make a real difference to your monthly budget.
A lower rate usually means smaller monthly payments and less interest paid over the life of the deal. Even a reduction of one percentage point can be significant. For example, dropping from 5.5% to 4.25% on a £200,000 repayment mortgage could reduce your monthly payment by over £150, and the savings over five years can easily run into several thousand pounds.
For anyone currently sitting on an SVR, the potential savings may be even greater. Many SVRs now sit somewhere between 6% and 8%, so moving onto a competitive fixed-rate deal could immediately cut your costs and give you greater certainty over what you’ll be paying each month.
Why movers and buyers benefit too
Although the headlines often focus on remortgage customers, these rate cuts are good news for buyers and movers as well.
As lenders trim the cost of remortgage products, purchase deals tend to move in the same direction. This means someone looking to buy their next home, or move up the ladder, may find that their borrowing power improves slightly or that monthly costs are more manageable than expected.
A more settled outlook for rates also boosts confidence. If you are planning to move in 2025 or 2026, the prospect of locking in a five-year fix at a more reasonable rate can make budgeting much easier. Many people who put their plans on hold during the period of sharp rate rises are now starting to look again at their options.
Things to think about before choosing a new deal
Even though the recent rate reductions are encouraging, it’s still important not to rush into the first deal you see.
Product fees can make a big difference to the overall cost. Some of the lowest headline rates come with high arrangement or product fees, which might not be worth paying if your mortgage balance is relatively small or if you plan to remortgage again in a few years. Always look at the total cost over the fixed period, not just the interest rate.
Your loan-to-value (LTV) ratio also matters. If your property has gone up in value since you last took out a mortgage, or if you’ve repaid a decent chunk of the balance, you might now sit in a lower LTV band. This can open the door to better rates. It’s worth getting an up-to-date estimate of your property’s value before you start comparing deals.
You should also think about how long you want to fix for. Shorter fixes, such as two years, give you flexibility if you expect rates to fall further. Longer fixes, such as five years, give you stability if your main priority is knowing exactly what your payments will be for a long stretch of time.
Most lenders allow you to secure a new deal several months before your current one ends, often up to six months in advance. This can be useful if you want to lock in a good rate now, while still benefiting from your current deal until it expires.
If you’re unsure which route is best, a mortgage broker can help you compare products across the market and explain the trade-offs between different options.