As talk of an interest rate rise coming sooner rather than later increases, mortgage borrowers may be starting to worry. Interest rates on home loans tend to go up before the base rate and some lenders have already increased the cost of their fixed-rate mortgages following signals from the Bank of
Is it worth moving if I'm on a low standard variable rate?
Many borrowers have benefited from mortgage contracts that were written when a 0.5% base rate seemed as likely as a Canadian heading up the Bank of
"A key question for someone on a low standard variable rate or tracker is going to be how flexible their monthly budget is," says
Rates on two-year fixes are below 2.5%, but on longer-term deals they are around 3% – Tesco, for example, has a rate of 2.99% for borrowers with a 30% deposit. So in the short term at least, you will be increasing your monthly payments. On that £120,000 the difference would be around £35. "The crux of the issue is how much the remortgage is how important it is to save money now versus saving money in the future and protecting yourself against an increase."
If you do think a fix is in order, rates are almost as low as they have ever been. "Any borrowers on low SVR mortgages should not overlook the current fixed rates on offer," says
Am I stuck if I'm currently locked in to a deal?
If you are locked in to a fixed-rate or tracker mortgage with exit charges, you do not have to wait until it has come to an end to take action. You can start shopping around before the end of your deal, and you may be able to grab a deal three months before your lock-in period finishes. Big lenders like Santander,
Will I have to pay fees if I switch lender?
It is highly likely that you will face some kind of cost for taking out a new mortgage. If you are switching lending, the new bank or building society will want a valuation of your property and need legal work to be done to make sure it is taking on a good risk. This can run to several hundreds of pounds.
However, some lenders do offer deals to attract switchers. "Remortgagers can access special deals, with many lenders throwing in a free house valuation or reduced legal fees," says
Even if you decide to stay with the same lender, just moving on to a new deal, you will probably face a product fee on the lowest rates. Tesco's 2.99% five-year fixed-rate for example comes with an upfront fee of £1,495. On a small mortgage you will be better off paying less in fees and going for a higher rate.
What if my house is worth less than when I got the mortgage?
Despite months of rising house prices in some parts of the country homes are worth less than when the property market peaked in 2007, and if you bought around that time your house could have fallen in value. This should not hamper your chances of getting a new mortgage if you had a reasonable deposit at the time. Your equity may have shrunk but you will still be able to shop around for a new loan.
Only one lender,
If, however, your stake in the property has completely vanished – and that is possible if you bought with a loan of 95% or even more – you will struggle to find a new lender willing to take you on. Your existing lender should offer you the chance to switch to another of its deals though, so you can still fix if you want to.
"If borrowers are looking to remortgage their home but they have lost equity in the past five years, always start by talking to your current lender," says Gregory. "They may have deals available that you can switch to. This is called a product transfer, and is normally a straightforward process."
What if I earn less than when I got the mortgage?
The new mortgage lending rules that were introduced in April mean that banks and building societies need to carry out rigorous affordability checks before granting mortgages, and if your circumstances have changed since you bought you may fall foul of these. Again, your existing lender is allowed to offer a better deal without making you go through the checks, so if you have recently become self-employed, seen your earnings cut, or taken on a new expense like childcare, it might be your best bet.
• You can compare and switch with the Guardian Mortgage service
Most Popular Stories
- Neighbor Warns Chris Brown to Stay Off His Property
- Venezuelan Officials Banned From Traveling in U.S.
- Adrienne Bailon Disses Ex-Lover Rob Kardashian
- Hispanic Arts Leaders Unite Across the Border
- Hiring on the Rise at Small Businesses
- NSHMBA Names Lincoln as Automotive Partner
- Islamic State Fights for Control of Syrian Oil Wealth
- How to Fit Green Energy Into Your Portfolio
- Sanctions Will Hit Russia Hard if Not Lifted Quickly
- Jerry Brown Favors More Shelters for Immigrant Kids