Remortgage Repayment Shock

Mortgage Quote Line

0845 108 0505

• Mortgages
• Credit Cards
• Loans
• Investments
• Life Insurance
• Home Insurance
• Insurance

Remortgage Repayment Shock

An unfortunate aspect of the mortgage market is that periodically interest rates will increase and mortgage lending will become more expensive.

For mortgage holders who have chosen a mortgage loan during a period of lower rates, a remortgage can prove considerably more expensive if interest rates have climbed during the fixed period.

This is termed ‘repayment shock’ and can cause considerable financial pressure, particularly amongst first-time buyers who are already struggling to meet repayments.

Repayment shock occurs when the mortgage market changes and becomes more expensive in between the time a borrower has been approved for a mortgage and their deal expires.

For example: someone choosing a two-year fixed-rate mortgage when rates were 4% could find rates of 6% or higher when their two-year fix comes to an end. In this instance, repayment shock could be considerable.

Avoiding repayment shock can be difficult, as the mortgage market always fluctuates. However, taking independent financial advice when initially choosing your mortgage loan could help in making the right choice.

Searching the whole of the market and getting the best deal possible will help to keep mortgage repayments low, giving the opportunity to save money and make larger repayments, reducing the mortgage term and the interest paid. To make early repayments, borrowers should choose a flexible mortgage.

At the very worst, borrowers may find it almost impossible to remortgage, as lenders have tightened their criteria and cannot offer a competitive deal. In this instance, borrowers can be trapped into paying an uncompetitive standard variable rate.

However, with the breadth of mortgage lenders and loans on the UK market, this situation is unlikely.