According to UK Finance, there are 2.4 million residential mortgage deals coming to an end between mid-2023 and the end of 2024.
If you’re one of these homeowners, or you’re a buy-to-let landlord and your deal is ending in the next 18 months, you normally have two options:
- Switch your mortgage to another lender to benefit from better terms or a deal more suitable for you.
- Stay with your existing lender, either on their “standard variable rate” (SVR) or by taking a “product transfer” (a new deal with your existing lender).
Many people choose the second option. Staying with your existing lender and just signing a couple of forms can feel like the easier choice.
However, remaining with your current bank or building society rather than shopping around for a new deal can negatively affect you in two possible ways. Read on to find out why just taking a loyalty product could leave you out of pocket.
1. It may not be the cheapest or best deal for you
At any given time, there are thousands of mortgage deals available in the market from dozens of lenders. Some of these will be well-known high street banks and building societies. Others will be lesser-known mutual lenders or even providers who only lend through intermediaries like Altura.
The choice of products your lender offers as you near the end of your current deal will only represent a tiny snapshot of what is available in the wider market.
So, there’s a strong chance that the deals you’re offered will not be the most competitive in the market, or the most appropriate for you.
As with any other financial product – whether that’s your car insurance or credit card – it often pays to shop around if you want to secure the best deal. As independent experts, we can search the market for you and compare the deals your lender has offered to you with the products available elsewhere.
Often, you can make considerable savings by switching your mortgage to another provider. And, if you have a larger mortgage, these savings can be even more substantial.
For example, on a £500,000 capital and interest mortgage over a term of 20 years, finding a two-year fixed-rate deal that was just 0.4% cheaper (5.5% rather than 5.9%) would save you more than £2,700 over a two-year period (figures from Altura mortgage calculator).
Even if there are some fees involved in switching, the savings you make can often be significant.
So, if your deal is coming to an end, talk to us before you simply accept your existing lender’s option. We’ll search the market for you to establish whether there may be better alternatives elsewhere.
2. The valuation of your home may be lower, meaning you could pay more
When your existing lender arranges a product transfer for you, they will normally use something called a “desktop valuation” to determine the value of your home.
Rather than instructing a surveyor to undertake a valuation, they will use house price data to determine how much your property is worth.
In some cases, this approach could result in your home being valued at less than it is worth. And, in this scenario, it might mean you are pushed into a higher “loan-to-value” band, which can increase the cost of borrowing.
Mortgage Solutions reports a recent example of this.
They share the case of a client who was looking to change his mortgage rate, and his lender’s automated system valued the property at £278,000. This meant he was eligible for a less competitive, higher loan-to-value (LTV) rate.
When his broker approached another lender, they achieved a valuation of in excess of £300,000, meaning an improved rate.
An accurate valuation can help you to secure a more competitive deal. So, always speak to an expert before you just accept your existing lender’s deal, as there may be alternatives available.
Get in touch
If your mortgage deal is coming to an end, speak to us before you commit to a new deal.
We can search the market for you and compare the products your existing lender has offered to help you decide the best course of action. With considerable savings often available through switching, we’re ideally placed to help you to navigate the remortgage process and to find you the most appropriate deal and lender for you.
To find out more, please email [email protected] or call us on +44 (0) 20 3411 0079.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
