ReMortgaging - can it still be worthwhile?
By Michael Challiner
Mortgage lenders have a somewhat insulting name for people who switch lenders to for lower interest rates – they call them "Rate Tarts". The author has a much more fitting description – Astute Shoppers! After all, why should you be subject to implicit criticism for ensuring you get the best deal? After all a £ from one lender as effective as a £ from another!
The mortgage industry is extremely competitive and as long as lenders use price as the main weapon in their marketing campaigns, price competition will encourage remortgagers to chase cheaper offers. Call them Rate Tarts if you must, but guess who'll be the richer for it! You're just playing the market by it's own rules.
In an attempt to curtail switching, some lenders have raised their up-front charges whilst the more enlightened have improved their client retention programmes. In such a cut-throat market, accolades must be awarded for the best customer retention programmes but raising up front charge will reduce the lenders market share, although on better profit margins. It seems that some mortgage lenders still have to find out that carrots beat sticks!
Take Birmingham Midshires for example. They currently offer a two year fixed deal at 3.89%. This looks like a bargain until you read the small print – they've hiked up the arrangement fee to a massive £1,499! If you write off this fee over two years at £749.50 per year, that's equivalent to an additional 0.75% on a £100,000 mortgage.
So if you want to remortgage you need to do a little homework. Firstly calculate the costs of moving your mortgage. Remember to add in the legal fees to switch the mortgage (usually around £350 on a £100,000 mortgage), the valuation fee (typically £250 for a £100,000 mortgage), the arrangement fee (typically £500), maybe a booking fee (£50?), plus the cost of any penalties you'll be subject to if you repay your existing mortgage.
Now get on the phone to your existing lender.
Let them know that you're considering moving for a better deal. Unless you put pressurise them, lenders often work on the basis that, provided they offer a reasonably attractive deal, natural apathy will prevail - borrowers will be happy to sit tight and avoid the cost, time and trouble of remortgaging. So shake their tree and see if a better deals falls down. If your current lender just offers you their standard variable rate they don't warrant your business!
Now you've found the best new remortgage deal you qualify for, weighed up the costs of moving and got your existing lender to quote for retaining your business, you can make a full comparison and a clear decision.
About the Author
Michael writes for Brokers Online Life Insurance who offer mortgage life insurance and most UK financial services including mortgages.
Additional reading -
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| Some other articles by Michael Challiner|