The cost of living crisis is everywhere you look in the news right now, it is not hard to see why.
Combinations of inflation, soaring energy prices, and increasing National Insurance rates are putting a dent in even the most frugal of pockets.
Last week, the Bank of England hiked up base rates to 0.5%, which does not seem a lot until you consider that it is double the previous level. The Consumer Prices Index put the average monthly costs at a 4.8% climb in the month to December 2021, so everything from groceries to fuel prices are getting steeper.
Millions of families are looking for ways to make life more manageable and get their finances under control.
The good news is that remortgaging could be a straightforward solution to bring down your monthly outgoings while the economy stabilises.
How Can a Remortgage Reduce My Monthly Living Costs?
While I cannot do much to combat the current inflation levels, I can look at ways to control monthly expenditure and free up a little breathing room.
Most mortgages cost around £800 per month (based on UK averages). That is probably the highest bill you pay and, for most, significantly more than the newly increased energy bills we are all (not) looking forward to in April.
Therefore, it makes sense to assess options to reduce that heavier cost burden and make the expenses you cannot minimise easier to budget for within your income.
Swapping a mortgage product could save you several times more than your regular utility bills (yep, even at those elevated prices!), so it is a perfect time to revisit the rate you are on and evaluate the opportunities.
You can read more about Remortgage Fees and Costs in our guide, so you are fully informed.
What Could I Expect to Save a Month By Remortgaging?
A lot depends on the nature of the mortgage product you are contracted to, how much you are paying, and the applicable interest rates.
Still, if you are on a Standard Variable Rate, you will undoubtedly stand to substantially slash your outgoings by changing onto a favourable fixed-term agreement.
There are, of course, a few caveats.
For example, suppose you are still within an introductory period or paying your mortgage against a fixed interest rate. In that case, I would want to check your mortgage agreement carefully to analyse early repayment charges before making any recommendations.
But, this kind of product switch saves the typical homeowner a huge £2,200 every year.
If you get a remortgage product at an interest rate of just 0.65% less than you are paying right now, you knock out the £600 average living cost increase coming our way in the next 12 months.
Could Remortgaging Help Me Navigate the Cost of Living Crisis?
The answer is a resounding yes!
Worries about spikes in energy costs and heavier tax burdens concern us all, but if you own your home, have equity in the property, and are willing to contemplate a remortgage, it could be the way forward.
I have written before about how House Prices Soar at the Fastest Rate in Four Years, so if you have been keeping up with your repayments, you have likely built-up equity to borrow against if you need financial support with other costs, too.
Standard Variable Rates (the interest rate you automatically change to once a fixed-rate arrangement ends) are rarely, if ever, competitive and mean you stand to make notable savings by remortgaging.
With such uncertainty about future interest rates, fixed rates are popular. If rates drop, there is always the option of refinancing – while reducing your outgoings in the meantime.
When purse strings are tight and looking set to get tighter, the most practical way to manage your expenses is to target the largest bill that will most impact your expendable income.
Please give me a call here at Think Plutus for more advice about reducing your mortgage costs, remortgage products, or alternative home financing that may effectively solve the consequences of the cost of living crisis for the foreseeable.