Homeowners can choose to pay the higher SVR or remortgage
When you take out a new mortgage, your initial interest rate is lower than the lender's standard rate. This initial period is the fixed term, e.g. "3.89%, fixed for 2 years".
The mortgage you choose dictates for how long you fix that period. One, two or five years are the most common 'fixed rate' periods.
But after that term is over, you fall back onto the lender's "SVR". That's their higher standard variable rate, which, as 'variable' implies, changes over time.
For many homeowners, unless they move home, their mortgage journey ends there. They pay whatever rate their lender tells them they must for the balance of their mortgage.
Misplaced loyalty and complacency can cost you £1,000s
In a world where we can change providers for almost any service with a click, why do we stay with one mortgage lender?
It could be that:
- homeowners feel a debt of gratitude or loyalty to the lender;
- changing providers is too complicated or risky;
- apathy imbues an unwillingness "to go through all that again."
Well, most lenders aren't in the habit of returning your loyalty.
They won't write to tell you that they have a cheaper mortgage than the one you're currently repaying.
Paying the SVR when you don't have to could cost you unnecessary £1,000s over the mortgage term. Even over a year, what you can save by remortgaging could outweigh redemption fees.
And it's never been easier to remortgage. With the right broker, you hardly need to lift a finger. They do the heavy lifting for you. Plus, their wider market access to more lenders could get you a more competitive rate.
Breaking the habit of paying too much for your home
Lenders are far more flexible today than after the credit crunch. For contractors, most lenders today offer contract-based underwriting through appointed brokers.
Speaking for ourselves, we never want our clients to pay more interest than they have to. Overpaying is a habit we want UK homeowners to break.
As part of our service, we contact all clients at least 8 weeks before their initial rate is due to expire. This gives everyone the opportunity to examine options available at that time.
It's easy today to compare a current provider's retention rate against remortgage rates. Remortgaging to a lower rate ensures the roof over your head won't cost you any more than necessary.
Don't paint yourself a gloomy picture when the outlook is rosy
Many homeowners don't remortgage because of envisaged hassle and cost. But the market has changed.
We can often transfer you to a more competitive mortgage rate with your current lender. This is worthwhile considering if you've built a relationship with them.
Or we can often arrange it so that the new lender agrees to pay all fees in return for moving your loan across to them. This often includes the cost of valuation and legal fees.
A good broker will always keep an eye on market conditions and interest rate trends. By relating that information back to you, you can choose not to overpay a penny on your mortgage.