It sounds ridiculously cheap, and indeed Atom Bank's new 1.29% 5yr fixed mortgage is - for those who can get it. Not everyone can, as you can't borrow more than 60% of your home's value (it rises to 1.99% if borrowing 90%), and it's so cheap it could be pulled at any moment. Yet it's indicative of the huge competition at every level, and is forcing others to slice rates to compete.
It's no wonder we're hearing of huge savings. JM emailed: "Read your guide, remortgaged, SAVING £200/mth [£2,400/yr]. Delighted." And MC said: "Followed your remortgaging help, will now be able to repay my mortgage 10 years early and SAVE £55,000 in repayments. Thank you."
So EVERYONE check if you can save £100s or £1,000s remortgaging. Here's the key info...
1. Check your credit file (for free). A bad credit report or credit file error can kill applications. So check yours ASAP, as it can take time to improve it. Get your totally free Experian Credit Report by joining the free MSE Credit Club, which also shows your credit score and Credit Hit Rate, plus how to boost them.
More lenders use Experian than any other credit reference agency, but it's worth checking your Equifax and Callcredit reports too - for how to get 'em free, see free credit reports.
2. Swot up on your current deal. To see if it's worth remortgaging (ie, switching mortgage to save), you'll need to know the following...
a) What's the interest rate? Plus monthly repayments & debt outstanding.
b) What type is it? Fix, tracker, discount, standard variable rate. See Fix vs Variable help.
c) When's the intro deal over? Eg, when does the 2yr fix end?
d) How long's the full mortgage term? When must it be fully repaid? Eg, in 10, 15 years' time etc.
e) Will I be penalised? Any early repayment/exit penalties?
Critically, work out your CURRENT loan to value (LTV) - the proportion of your property's value you're borrowing. Eg, £90k on a £100k property is 90% LTV. For each 5% your LTV drops, usually until 60%, the cheaper the deal. So if your home's increased in value since you got your mortgage, you may gain. See LTV help for full info.
3. Speedily find your top deal with a mortgage comparison. Your best may not be someone else's. So bash your info into our comparison tool (which also factors in fees) to get a benchmark for your top deal, then read on.
Mortgage Best Buys
Remortgaging Best-Buy Comparison Tool
(Alternatively, see our First-Time Buyers or Moving Home tools)
PS: We're working on getting Atom's mortgage deals into the tool, so it's not there now. If you want to get it, you'll need to go via a broker.
|Typical current top deals on A £150k mortgage
Links take you to our Mortgage Best-Buy tool
|Deal||Rate + Fee||Cost/yr in deal term (incl application fee) (1)|
|Typical SVR rate||4%||£9,500|
|Fix 2yr at 60% LTV||0.99% + £1,495||£7,530|
|Fix 2yr at 90% LTV||1.89% + £1,450||£8,260|
|Fix 5yr at 60% LTV||1.75% + £999||£7,615|
|Fix 5yr at 90% LTV||2.55% + £995||£8,325|
|Tracker 2yr at 60% LTV||1.1% + £999||£7,365|
|Tracker 2yr at 90% LTV||2.24% + £999||£8,340|
|(1) Assumes fee paid upfront, 25yr term. Excludes cashback.|
4. HUGE savings are on offer if you're languishing on your lender's standard variable rate (SVR). This is the rate most fixes and trackers revert to when intro deals end. They're often horribly expensive compared with shorter-term deals.
To show you the size of possible savings, here are some major lenders' current SVRs (some have cheaper versions for older customers), which now average about 4% - see SVR help for more:
Barclays 3.74% | Coventry BS 4.49% | HSBC 3.69%
Lloyds & Halifax 3.74% | Nationwide 3.74%
RBS & NatWest 3.75% | Santander 4.49% | Virgin Money 4.54%
Yorkshire BS 4.74%
So someone moving from a £150k mortgage with 25 years remaining at 4% SVR to a 2yr fix at 0.99% will save about £5,300 over 2yrs - even after taking £1,500 fees into account. See how this works for you: Compare Mortgages Calc.
5. Grab a copy of our FREE 60-page Remortgaging 2017 Booklet. Your mortgage is likely your biggest expenditure, and just because you've done it once, doesn't mean it's the same this time around. So be sure you know what you're doing. Our updated guide takes you through it step by step.
- Remortgage Booklet 2017: Download instant PDF | Order printed
- Remortgage-help 5-min video: Sometimes it's easier to watch than read. See the short remortgage help video.
6. Use savings to bag a better mortgage. The lower your LTV threshold, the better the deal you can get. Rates tend to fall for each 5% less you borrow from 95% to 60%, so use savings to get into a lower threshold and you can save big. For example...
If you've a £150k home, and want a £137k remortgage, that's 91% LTV, and the top 5yr fix is 3.69%. But use £2,000 of savings to reduce the borrowing & you'd be at 90% LTV - where the top 5yr fix is 2.55%, saving c. £1,100/yr in repayments alone.
See how pumping more of your savings into your mortgage can help you drop an LTV band.
7. Midway through your mortgage? It could pay to ditch your fix. Use our Ditch your fix? tool to see if you can save by switching from a pricey fix. It won't work for all, as some will face exorbitant early repayment fees - but with rates so low, why not check, just in case?
Eg, if you've a 3.49% fix with 23mths left on a £100k mortgage, you could save if you can switch to anything better than a 1.51% fix with a £1,000 arrangement fee, even taking into account £2,800ish extra switching fees (incl early exit charge, legal & valuation fees).
8. You can lock in up to 7 months ahead of remortgaging. Many lenders let you fix your rate 3-7 months ahead, so you can grab the right deal now and protect against rates disappearing. But there are risks with possible advance fees, while rates could fall again. See Long lock-in mortgage help for full info.
9. It's often better with a broker, especially if you've unusual circumstances, eg, more than one mortgage, buying above a shop or self-employed. A good broker can match you to the right deal and have often difficult-to-find info - see Top mortgage brokers. What's more, many borrowers are frozen out of ordinary deals because they have highly individual circumstances which can make even the simplest loan application impossible. In such cases a broker would be invaluable as they know the ins and outs of a lender's ability to be flexible.
However, a few lenders, eg, First Direct, cut brokers out and only sell direct to the public. So some brokers can and do exclude them - we suggest you use a broker alongside our mortgage comparison, which has all these deals.
10. We've calcs galore to test your options. Now you know typical rates, use our mortgage calcs to compare 'em and see what you could save:
Ultimate Mortgage Calculator
Eight tools to home in on the right answer for you, incl...
Basic Mortgage Calc | Compare Two Mortgages | Mortgage Overpay Calc | Compare Fixed Mortgages | Ditch Your Fix?
11. First-time buyer? We've a separate guide. While much of the info remains the same, our First-Time Buyers' Guide tells you how to boost your mortgage chances, save for a deposit and use the Lifetime ISA.
This article first appeared in the weekly email on 19 April 2017.