A significant amount of residential mortgages are due to mature later this year.
According to a new analysis by Yorkshire Building Society, more than £29 billion worth of UK residential mortgages are scheduled to reach maturity in October 2021. It’s the most significant mortgage maturity peak this year, creating an opportunity for borrowers to remortgage and obtain more competitive deals, saving hundreds of pounds as a result.
The analysis shows that rising house prices in many parts of the country will improve the loan-to-value (LTV) ratio for borrowers, offering access to better remortgaging deals and lower monthly payments. One example is a homeowner in the North West of England, who originally borrowed 90% LTV on a £250,000 property in 2019. This homeowner could now benefit from a reduced LTV of 80% when remortgaging because house prices in the region have increased, on average, by 13% in two years. For this homeowner, switching from the average fixed rate of 2.66% available for a two-year deal at 90% LTV in 2019 to a current two-year fixed rate of 1.85% for borrowers with 80% LTV could save the borrower £1,000 a year in repayments.
Alternatively, someone remortgaging to a more competitive rate might borrow more money to spend on home improvements. In the example given, the borrower could use the increased value of their property to add £10,000 to their mortgage and still benefit from the terms of an 80% LTV product. Borrowing £10,000 more for the remainder of their mortgage term, but accessing a cheaper interest rate, would still reduce repayments by £37 a month. Ben Merritt, senior mortgage manager at Yorkshire Building Society, said:
“With such a large proportion of mortgage deals maturing later this year it’s set to be a busy autumn as borrowers look to renew their home loans.
“Mortgages are likely to be one of the biggest financial commitments homeowners have, and undoubtedly some people will have found their circumstances or priorities have changed recently so the opportunity to remortgage may well be timely.
“With house price increases benefitting many parts of the country, borrowers could be pleasantly surprised with their new loan requirements. It could also be good news for homeowners who found themselves wanting to improve their home after spending so much time there in the last year. Raising additional funds as part of the remortgage to convert garages or landscape gardens may now be possible without much impact on the monthly mortgage payments they’re used to paying.”
For homeowners with mortgage deals maturing later this year, it is worth considering options now, as many lenders will issue offers that remain valid for up to six months. Ben added:
“It’s possible to arrange a remortgage many months in advance, which gives borrowers the reassurance that when their current deal expires it will not revert to an often more costly standard variable rate (SVR). Instead, prepared homeowners can have peace of mind that everything will go ahead as planned, and importantly, with breathing space to consider the best options, they can be sure the new mortgage will meet their needs for the coming years.