Since you first got your mortgage, have you checked to see if you’re getting the best deal? Your mortgage may no longer be as competitive as it was, but you could get a better deal if you switch.
Review your deal
When your initial fixed or discounted rate deal on your mortgage runs out, your lender will usually put you on its standard variable rate (SVR). This is typically a few percentage points higher than the Bank of England’s base rate, but it can also change whenever your lender decides to do so. Lenders’ SVRs are rarely the most competitive deals, so you may be able to find a more attractive offer by shopping around.
You should review your current mortgage regularly to see if you’re paying too much. Have a look around at other deals when your fixed or discounted rate ends, whenever the Bank of England changes interest rates, or just every six months.
Keep in mind that there could be costs involved in remortgaging or switching products, and it’s important to include these when you weigh up whether switching could save you money. Many lenders require you to pay an 'early repayment charge' (ERC) if you switch in the first few years when you’re still in the ‘locked-in’ period of your mortgage.
Rates set to rise?
As the Bank of England is expected to start to raise its base interest rate next year, now could be a good time to look at switching on to a fixed-rate. A fixed-rate mortgage is what it sounds like – the payments you sign up to will not change during the term of the fixed-rate period. If interest rates do go up next year, this wouldn’t affect you if you’re on a fixed-rate – but your payments wouldn’t fall in the unlikely event of rates going down either. What a fixed-rate offers you is peace of mind that you know what you’ll be paying for the period of this deal.
You’ll usually have to agree to stick with this rate or ‘lock-in’ for a few years, meaning you might not be able to switch again if a better deal comes along without attracting high early repayment charges. The only person who can decide if you should move on to a fixed-rate mortgage is you, or you can seek advice from an independent source, and it’s important you look at all of the possibilities to figure out whether it’s right for your needs.
If you’re still interested in remortgaging, make sure you weigh up all the options. You should research to see if it’s the right deal for you, and whether you’ll be financially better off or not once any charges are taken into account. A mortgage broker like Ocean can provide you with a choice of deals and rates currently offered by lenders, which may help you consider all your options and decide if you want to switch or not. Make sure you factor in any costs you’ll have to pay and work out if you want to switch to a fixed-rate, a different deal, or if you’re better staying with what you’ve got.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.