Mortgage lenders now letting existing borrowers lock in today's rates SIX MONTHS early – does yours?
Even if you are locked into your mortgage you might be able to get a new rate at today's prices with several major lenders increasing how far in advance existing borrowers can tie into new deals. The change comes as interest rates are on the rise with the base rate hitting 2.25% in September.
Six major lenders – Barclays, First Direct, HSBC, NatWest, Nationwide and Skipton, which control two-fifths of the market – have lengthened the period during which existing borrowers can reserve a new mortgage rate before their current deal expires. Co-op Bank also plans to make similar changes later this year.
If you have a mortgage with any of these lenders you will be able to begin what's known as a "product transfer" process four and six months before your current deal ends. Previously, this window was nearer to three or four months.
Securing a new rate via a product transfer can often be done both quickly and easily online (or by phone or through a broker). But beware if you need to pay any fees up front to secure the rate, as this might become an issue if you find a better deal later down the line.
See below for more info about this and our Cheap mortgage finding guide for help finding the best rate for you.
How lenders are extending mortgage product transfer periods
When it comes to product transfers, you'll normally move on to the new mortgage rate when your existing deal comes to an end. In some cases, you might be able to move on to the new rate earlier than that – though be aware that this might result in you being hit with an early repayment charge.
Here's a round-up of how far in advance some mortgage lenders let you start the product transfer process:
|Lender||Changed / changing its rules?||How far in advance you can start the process|
|Barclays||Yes||Increased to six months from three months|
|Clydesdale Bank||No||Six months|
|Co-op Bank||Yes||Increasing to six months from four months (1)|
|First Direct||Yes||Increased to four months from three months|
|HSBC||Yes||Increased to four months from three months|
|Nationwide||Yes||Increased to six months from five months|
|NatWest||Yes||Increased to six months from four months|
|Skipton Building Society||Yes||Increased to six months from four months|
|Virgin Money||No||Four months|
|Yorkshire Bank||No||Six months|
|Yorkshire Building Society||No||Four months|
Sticking with your existing lender: the pros and cons
For example, Barclays' current top two-year fixed-rate remortgage at 60% loan-to-value (LTV) – the proportion of the property's value you're borrowing as a mortgage – comes with an interest rate of 6.2% (with a £999 product fee) for new customers. Yet the product transfer rate on the equivalent deal for existing Barclays customers is either 5.43% (with a £999 product fee) or 5.83% (with no product fee).
Another advantage of product transfers is that legal and valuation fees are sometimes thrown in for free (though this is often the case with remortgages too – so do check).
Finally, product transfers can be attractive because they don't often come with affordability assessments if you're not borrowing more money, meaning you could be accepted for a new rate almost instantly. With remortgaging, as affordability assessments form a key part of the switching process, you might struggle to be accepted with a new lender, particularly if you're on the border of affordability (something that's the case for many people right now due to the cost of living crisis).
Why it may be worth starting the mortgage-switching process early
While the lowest interest rate on a two-year fix was around 0.8% at the end of 2021, the cheapest two-year, five-year and 10-year fixed remortgage deals are now 5.64%, 5.24% and 5.09% respectively – and it's widely expected rates will continue to rise. This means many homeowners whose mortgage deals are coming to an end are having to switch to significantly more expensive rates, as ultra-low deals have disappeared.
As a result, many homeowners are starting the mortgage-switching process earlier than usual in order to secure today's interest rate, fearful that interest rates might be even higher if they delay taking action.
Any risks with locking in a new deal early?
The main risk with locking in a new mortgage deal early – be that a product transfer or remortgage – is paying a fee up front to secure the rate, only to find a better deal later down the line that you'd rather switch to (something that's a possibility if you're reserving a rate months in advance).
Two main fees are typically associated with product transfers: a booking fee (increasingly rare these days) and a product fee (also known as an arrangement fee).
For the few people that do have to pay a booking fee (normally £200-£300) to secure a rate, these are often non-refundable. So if after locking in a rate you find another one that's better and you ditch the initial rate, you might not be able to get back the booking fee back – though some lenders do refund. Where you are required to pay a booking fee, it's best to see any money parted with up front as an 'insurance' against interest rates rising even further.
The more common fee associated with a product transfer is the product / arrangement fee (typically £1,000+, but can be less – or even free). This might need to be paid up front, but often you can opt to add the arrangement fee to your mortgage. If you choose the latter, the arrangement fee won't be added to your loan until completion – so effectively you won't have parted with any money up front to secure the rate. This means that, if you ditch the reserved rate before it kicks in, there shouldn't be any money to claw money back.
Yet every lender is different, and even if you do pay the arrangement fee up front, some are willing to refund this if you later change your mind. So do check before locking in.
Remortgage help – what you need to do
Full details are in our free 62-page PDF remortgage guide (there's also our free 53-page first-time buyers' guide) but in brief...
- Benchmark what type of rates are out there. Our mortgage comparison tool will help you see what's available currently and compare it against what you're paying now.
- Dig out the details of your current mortgage. Such as... What's the rate? What type is it? When's the intro deal over? When must it all be repaid? Will you be penalised to switch deals? What's the loan to value?
- Check out your existing lender's cheapest deal. This is known as a 'product transfer'. Use this rate as benchmark to beat.
- If you've savings, use them to bag a cheaper deal. If you still owe more than 60% of your home's value on a mortgage, the more you can do to drop an LTV band, the cheaper your remortgage will be.
- Check out the size of any possible savings on our mortgage calculators. Stick your digits in here... Basic mortgage calculator - including what it'll cost | Compare two mortgages | Compare fixed rate mortgages | 'How much can I borrow?' guesstimator
- If you're thinking of applying, it's all about whether you'll be accepted. Lenders need to check if you're 'affordable' and whether you could meet repayments if rates shot up. So see our 17 ways to boost your mortgage chances and don't forget to Check your credit report for free. Then read up on how to Improve your creditworthiness.
- If you're serious, speak to a broker - they're currently more important than ever. See our full help on how to find a good broker.
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