Need a new mortgage? Staying with your existing lender may now be cheaper than switching to a different one
If you need a new mortgage you might now be much better off sticking with your existing lender than switching to a new one. We look at the difference between 'sticking or twisting', and why the balance between the two has shifted.
When your mortgage deal expires and you're in need of a new one, you have two options: switching to a new deal with a different lender – known as remortgaging – or getting a new deal with your existing lender – known as a 'product transfer'.
For many years, finding the cheapest deal has usually been done by scouring the wider mortgage market and remortgaging with a new lender. Yet in recent months, with interest rates having climbed substantially, the gap between product transfer and remortgage deals has narrowed – and in many cases it's actually reversed. In addition to improved rates, product transfers also offer other advantages, such as ease of acceptance.
If you need to find a mortgage deal soon, see our Getting ready to remortgage guide for top tips.
The difference between a 'remortgage' and a 'product transfer'
The key differences between a remortgage and a product transfer are as follows:
With product transfers you stick with your current lender, but with remortgages you move elsewhere. For example, if you switch from Barclays to Nationwide, you'd be remortgaging. If you simply got a new deal with Barclays, you'd be getting a product transfer.
Fees are often lower with product transfers. You'll normally have to pay an arrangement fee, but that's often it. Legal fees are uncommon and you're unlikely to be charged a valuation fee (though this can be the case with remortgages too – so do check).
There's not normally an affordability assessment with product transfers, which makes the process quicker. So if you're not borrowing more money, this means 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, and the process will normally take longer.
Why you should consider sticking with your existing mortgage lender
If you're a homeowner with a mortgage deal that's expiring, there is increasing reason to consider switching to a new deal with your existing lender – though it's always best to check the deals you could get elsewhere before deciding.
That's because the difference in interest rates between product transfers and remortgages has narrowed considerably in recent months. In many cases, lenders now often offer a better rate to their existing customers than they do to new customers, as this table shows:
Lender | 60% loan-to-value | 75% loan-to-value | 90% loan-to-value | |||
|---|---|---|---|---|---|---|
| Existing customer | New customer | Existing customer | New customer | Existing customer | New customer |
Barclays | 5.43% | 5.62% | 5.52% | 5.94% | 5.62% | 5.94% (2) |
HSBC | 5.64% | 5.99% | 5.69% | 6.04% | 5.99% | 6.24% |
Nationwide | 4.84% | 5.54% | 4.84% | 5.54% | 4.84% | 5.89% |
NatWest | 5.67% | 5.89% | 5.74% | 5.89% | 5.99% | 6.14% |
Skipton Building Society | 5.85% | 6.07% | 5.97% | 6.12% | 6.89% | 6.26% |
Virgin Money | 5.59% | 5.59% | 5.69% | 5.69% | 5.89% | 5.89% |
Yorkshire Building Society | N/A | N/A | 5.98% | 5.63% | 6.31% | 5.72% |
(1) Assumes two-year fixed-rate mortgage deal. Correct as of 14 November. (2) Maximum loan-to-value – the percentage of the property's value you need to borrow – is 85%.
If you're considering a product transfer but need to borrow more money on top of your existing mortgage amount, this is known as a 'further advance'. Interest rates on further advances can be worse than like-for-like product transfers, but this isn't always the case – again, it's worth comparing the rate your existing lender offers against what you could get on the wider market.
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 (LTV)?
Check out your existing lender's cheapest deal (product transfer). Use this rate as a 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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3 December 2024
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