Martin Lewis shares the best time to remortgage as rates drop below 4% for the first time in years

Finally, it seems things are looking up for homeowners, as mortgage rates have dropped below 4% for the first time in years — and Martin Lewis has some tips to ensure you make the most of it.

The Bank of England voted to drop its base rate to 5% in August, but lenders are now offering fixed rate deals for far less (the cheapest coming in at under 4% for five or two years) which tends to be an indicator of where the market is headed.

And while this is undoubtedly great news after over two years of rapid inflation and rising bills, it raises the question: should you switch now, or hold off in case things continue to improve?

Thankfully, Martin is on hand to help, sharing a recent episode of his BBC 5 Live podcast on the Money Saving Expert newsletter dedicated to the topic.

Alongside mortgage broke Andrew Montlake, MD at Coreco, the MSE founder explained that although the market consensus suggests rates will start to go down, events like Liz Truss’s September 2022 mini-budget (which led to banks and building societies withdrawing 40% of mortgage products amid concerns about an increase in the interest rate) show nothing is guaranteed.

What you do depends on the type of mortgage you currently have and your attitude to risk, and Martin says you should still go and speak to your mortgage broker for bespoke advice.

However, if you’re currently on a fixed or tracker rate and have six months or less left until you’re able to switch, Andrew (known as Monty) recommends clients ‘lock into a rate now’ but keep an eye on things before signing on the dotted line.

Your broker can then ‘continue to review the market with your current lender and the rest of the market as well, up until around about four weeks before you actually are due to complete.’

‘Even if you in principle lock into a rate now, you can still potentially change that rate if things get better,’ Monty adds.

He says this is ideal for those who are worried about market fluctuations, but highlights one caveat: you want to ensure you aren’t charged a large fee for pulling out of a deal for a cheaper one, as this could negate any extra savings made.

Either way, things aren’t likely to change too much, and the predictions are baked into banks’ fixed rate offers.

‘While mortgage rates may shave down towards the end of the year, no one’s really expecting them to be a substantial step change in rates from where they are now,’ explains Martin.

‘If you wait, there may be a small marginal gain, but if you’re waiting and your fix has come to an end, or you’re on a high standard variable rate (which is typically around 8%) then the small gain from waiting is easily outweighed by the massive cost of being on the standard variable rate.’

According to the financial guru, ‘you may as well go and get your cheap deal now anyway, because you do not want to be on your expensive standard variable one.’

Meanwhile, if you’re currently on a tracker mortgage deal, you’ll pay an average of £340 less annually as a result of the Bank of England’s base rate change. It’ll likely be cheaper to remortgage once your term length is up, but it’s still an improvement on 14 consecutive hikes, right?

Matt Smith, a mortgage expert at Rightmove commented: ‘We would expect the downward trend we’ve started to see continue. This sets us up for hopefully further cuts to come, and when we have seen further reductions to the base rate, people should really start to see the impact.

‘However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%.’

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