Do we have to shout? Switch your mortgage!
Not shifting your lender is the equivalent of turning down a big pay rise. By Sara Yates
MORE than a fifth of mortgage payers won’t shift to a new lender, no matter how good a new deal they are offered, according to research from YouGov and Habito. Mortgage experts say staying put is the equivalent of turning down a pay rise.
According to the new data, more than a third of borrowers haven’t changed their mortgage in the past five years, despite an abundance of deals on offer. This means that homeowners could be unnecessarily overpaying by thousands of pounds a year.
Most at risk of overpaying are homeowners whose deals have ended and have moved to their provider’s standard variable rate (SVR).
“Now is the time to consider remortgaging,” says Jeremy Duncombe, director at Legal and General Mortgage Club. Borrowers on an SVR could save “the equivalent of a monthly pay rise or a family holiday at half-term,” he adds.
Mortgage rates plummeted again this year. With only 10 per cent equity in your property, HSBC, First Direct and Yorkshire Building Society all offer mortgages with a two-year fixed interest rate below two per cent. If you are lucky enough to own up to 40 per cent of your property, you can get a fixed interest rate below one per cent with Yorkshire Building Society (plus fees of £1.825).
If you prefer to have a mortgage that tracks the rate set by the Bank of England, HSBC offers the lowest rates. The best, reserved for homeowners with an LTV below 60 per cemt, is just 0.74 per cent above the base rate. This means it is just 0.99 per cent.
But even if you only 10 per cent of your property, the rate only rises to 1.59 per cent above the base rate, at 1.84 per cent. In all cases a £999 booking fee applies.
These rates are all a far cry from the lenders’ SVRs. For First Direct and HSBC the rate jumps to 3.69 per cent ignoring the countless mortage deals on offer can cost dearly
at the end of the two-year deal, while for Yorkshire Building Society it is an eye watering 4.74 per cent. Even more exorbitant are Leeds Building Society, Accord Mortgages and Furness Building Society who all have SVRs above five per cent. Could you give yourself the equivalent of a hefty pay rise by re-mortgaging? Comparison websites are a great place to start. They take seconds and give you at least an idea of how much a new deal could save you each month. Do remember to include the fees in your comparison. These vary in name, but are typically upwards of £1,000 to take out a mortgage, plus a £100 or more to have your property valued. Other fees may also apply.
Once energised by the potential savings, you have a choice: speak to the providers directly or use an independent mortgage broker. If you want an easy life, opt for the broker. They survey the market, help you pick the right deal and mean you only need to give them your personal information once. Best of all, many won’t charge you a penny. Instead, companies such as online broker Habito levy the fee on the lender, with the amount fully disclosed.
You can make the process smoother and quicker by collating your paperwork in advance. Just like when you took out the initial mortgage, you’ll likely need proof of your identity, earnings and where you live.
This means digging out bank statements, payslips, your P60, utility bills, passport and if self employed, your last three years’ accounts/tax returns. If you have gone paperless, expect to get some of these certified by your bank or a professional.
Even for the super efficient getting a mortgage takes time, often four to eight weeks. Fortunately many lenders will honour your mortgage offer for at least
three month. So start early. There really is no need to get sucked onto an expensive SVRs.
Your mortgage is likely your biggest financial obligation; don’t let it be your biggest blind spot.
Instead, channel your willingness to switch phone and utility providers to get the best deal and save yourself a packet.
Walk on by?: