The recent 0.5% cut in the Bank of England base rate should have been good news for all homeowners looking to remortgage but the ongoing mortgage drought is continuing to make things tricky for people coming off their fixed rate deals. It won’t be easy finding a decent deal but by adhering to the following points you should be able to spare yourself the indignity of resorting to your current lender’s standard variable rate (SVR).
1. Do the maths. Chances are that your house’s value has gone down recently; therefore the loan-to-value (LTV) ratio will have changed. LTV refers to how much you are borrowing in relation to the value of your home; the lower the LTV ratio, the more competitive deal you are eligible for. Databases such as zoopla.co.uk provide up-to-date information on house prices and websites such as houseprices.co.uk will tell you how much similar properties in the area have sold for recently.
2. Negotiate with your current lender. Don’t write off the bank through which you have your current mortgage. Many lenders have deals reserved for existing customers that won’t be publicised in the media and won’t be offered to brokers. If you go to them armed with details of offers from other lenders it will increase the amount of ammunition that you possess. Some lenders will automatically put you on a tracker rate when the discounted period ends, rather than their SVR. The Financial Services Authority has impartial mortgage tables at moneymadeclear.fsa.gov.uk. Remember, if you’ve been a model customer by coughing up on time every month, they won’t want to lose you – especially in the current climate.
3. Talk to the experts. Talk to as many brokers as you can – they know the market and often have access to special deals not available to the general public. Use the information in your most recent mortgage statement to find out exactly how much you’ve paid and how much you still owe – they will need this information. You also need to look at the contract to find out if any early repayment fees apply or if there is an exit fee – although this shouldn’t be the case if you are coming to the end of a discount period. Remember that your new lender will insist on the same legal processes as your previous one to ensure that your property offers proper security for them. Remember also that if you take a mortgage deal out with a broker they will charge you a substantial fee, so it would be best (if possible) just to use them to gauge where you stand in the current market conditions and to build up your case with your existing lender.
4. Current best deals. Although in the recent downturn, the best deals tend to be reserved for the people with the most amount of equity, the most attractive loans without vast arrangement fees currently come from Nationwide, who are offering a two-year base rate tracker at 5.43% with a £599 fee. They are also offering a two-year fixed deal at 5.98% with a £599 fee; both deals come with free valuations and conveyancing for remortgagees. The Cheltenham & Gloucester are also offering a tracker deal at 5.59% with a £495 fee.
Note that although there isn’t currently much difference between a tracker and a fixed rate deal, the tracker will be the one that offers the most attractive rate in the current market conditions as the Bank of England continue to slash the interest base rate.