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Remortgaging in High Interest Rate Climates

Interest rate graph

Remortgaging in High Interest Rate Climates

Remortgaging one’s property, though common and often beneficial, can become a significantly trickier task during periods of high interest rates. With the financial market in the UK being as unpredictable as it is, understanding the challenges you might face when seeking to remortgage can help you make more informed decisions.

Rising Rates and Increasing Costs

The main issue with remortgaging in high interest rate environments is the associated rise in costs. A high interest rate means that the cost of borrowing is greater, hence, your mortgage repayments will likely be higher. This can place an added financial burden on homeowners, especially those with a large mortgage balance or those who are already financially stretched.

Effect on Property Values

High interest rates can also potentially lead to a decrease in your property value. When interest rates are high, fewer people are able to afford to take out mortgages, leading to a decrease in demand for property. Lower demand can result in lower property prices, making it more challenging to remortgage as the value of the security (the property) has reduced. This situation is often referred to as negative equity, where the mortgage is higher than the value of the property. This can lead to some lenders being unwilling to offer remortgaging options.

Difficulty in Securing a Good Deal

In an era of high interest rates, lenders are naturally more risk-averse. The higher the interest rates, the greater the chances of default by borrowers due to the increased financial burden. This leads to stricter lending criteria and fewer competitive remortgage deals on the market, making it more difficult to secure a remortgage on favourable terms.

Affordability Checks and Stress Testing

High interest rates necessitate more stringent affordability checks by lenders. These checks include ‘stress testing’ to see if you can afford repayments if interest rates were to rise even further. With high interest rates, you might not meet the affordability criteria, meaning your remortgage application could be rejected.

Variable Rate Mortgages

If you are on a variable rate mortgage and rates rise, your monthly repayments will increase. This can come as a shock if you’re not financially prepared for it. For those wanting to remortgage, high interest rates may deter them from switching to a new mortgage deal, especially if the new deal’s repayments are significantly higher.

Implications for Buy-to-Let

Those with buy-to-let properties will also feel the pinch in times of high interest rates. Rental income may not cover the increased mortgage costs, leading to a negative cash flow. Additionally, stricter affordability rules for buy-to-let mortgages introduced by the Prudential Regulation Authority mean landlords now have to prove they could still pay their mortgage if interest rates were to soar above the current 5%.

Speed and Convenience

Because they’re not relying on securing a mortgage, the transaction process can often be completed within a matter of weeks. This can be beneficial for homeowners who are financially stretched and require a rapid solution.

At Home House Buyers, we handle every aspect of the sale, including solicitors and the associated costs, making the process much easier for the seller.

Certainty of Sale

In a housing market affected by high interest rates, there can be a degree of uncertainty surrounding property sales. Deals can fall through due to buyers being unable to secure a mortgage at a high interest rate. Cash buyers, however, offer a higher degree of certainty because they’re not beholden to lenders’ decisions.

Property Condition

At Home House Buyers, we purchase properties ‘as is’, meaning we don’t require the seller to make costly repairs or renovations before the sale. This can be a boon for homeowners who may not have the funds available to improve their home to make it more attractive to traditional buyers.

Avoiding Negative Equity

Selling can also help homeowners avoid falling into negative equity, a situation where the mortgage owed is higher than the property’s value. This can be particularly relevant in a market where high interest rates are pushing property prices down.

Selling Your House Quickly to Avoid Remortgaging

If speed is a primary concern, we can make you a cash offer for your property cutting out many of the delays associated with a traditional sale.

Looking to sell fast? Fill out the form below and a representative will be in contact shortly. Alternatively call us on 0800 612 1366, or email

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