Mortgage market improvements see remortgagers thousands of pounds better off versus two years ago

The latest research by award winning mortgage adviser, Alexander Hall, has shown that, as a result of improving mortgage market conditions, those coming to the end of a two year fixed term on their mortgage are likely to be thousands of pounds better off when it comes to remortgaging.

Alexander Hall looked at the average monthly cost of a mortgage for those currently coming to the end of a two-year fixed term and how the cost of borrowing has changed since they initially took out the mortgage.*

Homebuyers stand to save £995 when remortgaging

The research shows that two years ago, the average homebuyer could have secured a two year fixed rate mortgage at a rate of 5.26%

Based on the average UK house price of £260,941 at the time, and having placed a 15% deposit, this would have seen them making a full monthly repayment of £1,330 on a loan of £221,800.

Fast forward to today, and the average mortgage rate for a two year fixed mortgage has fallen to 4.92%.

The average homeowner coming to the end of a fixed two year term will have paid £9,045 off of their original mortgage (on a capital repayment basis), meaning that when it comes to remortgaging they will have a remaining loan of £212,755.

This will see them pay £1,289 per month, a saving of £41.47 per month on their previous mortgage, totalling £995 over the course of the next two years.

Landlords even better off

However, it’s buy-to-let investors who stand to make the biggest saving when remortaging in the current market.

Two years ago, the average buy-to-let mortgage rate sat at 5.34%, resulting in an average full monthly repayment of £1,183.

Today, this average rate has dropped to 4.40% and, with the average landlord remortgaging to the tune of £187,815, this will see them paying just £1,083 per month.

That’s a reduction of £100.11 per month or just over £2,400 over the next two years.

Stephanie Daley, Director of Partnerships at mortgage advisor, Alexander Hall, said, “The nation’s borrowers have had to traverse an increasingly difficult landscape in recent years, as the BOE base rate climbed consistently from the end of 2021 and remained at the peak of 5.25% until the summer of last year.

This means that those taking out a mortgage two years ago would have done so as rates were climbing and whilst those opting for a fixed rate product may have avoided a peak in mortgage rates, they still would have been paying a considerable monthly repayment.

The good news is that the mortgage market has since stabilised, first due to a hold on the base rate and then following the three cuts seen since August of last year. As a result, those now looking to remortgage are likely to see the cost of their monthly payments reduce and this should equate to a sizable saving should they opt to lock in for another two year term.”