While the Bank of England kept the base rate on hold at 0.5% earlier this month, it warned that interest rates were likely to rise more quickly than originally expected. This could lead to some nervousness among those looking for a mortgage later this year.
Traditional wisdom has been that you have to wait until you are near the end of your current deal before securing another. But some lenders will give borrowers who are remortgaging as much as six months to take up a rate they have been offered in principle. This means that if you are coming out of a deal in September, you can start searching for a new one as soon as March.
“As the potential for another base rate rise looms there will be a growing number of borrowers considering the impact on their mortgage,” says David Hollingworth of L&C Mortgages. “For those on a standard variable rate without any tie-in, the chance to switch to a good fixed rate is one they should grab with both hands.
“Borrowers can set the wheels in motion to take advantage of today’s low rates. As interest rates start to climb, locking an offer in now could prove worthwhile. However, it’s important to check the terms of each deal and lender, as they take different approaches.”
Tesco Bank’s mortgage offers are valid for 180 days, while those from Bank of Ireland, NatWest and Yorkshire building society last for six months. Meanwhile, Barclays’s deals are valid for six months from the date of the application, not the offer.
Other lenders set specific completion deadlines. Halifax, for example, requires completion on products requested now by 31 September, 2018, while TSB asks for deals to be completed before 31 July, 2018.
It is important for borrowers to check the terms of individual offers as they will vary depending on whether you are buying a property or remortgaging.
Coventry building society will allow six months from the application date to complete on a purchase, but just four months from the application date on a remortgage.
As borrowers may decide to ditch an initial offer, it is better for them to choose a deal that has no upfront fees attached as they could end up out of pocket, Hollingworth adds.
Ray Boulger, senior mortgage technical manager at John Charcol, says arrangement fees are due on completion of the mortgage, so will only need to be paid once the rate has finally been taken up.
It might also be worth some borrowers considering a product transfer with their current lender, especially if their circumstances have changed since they took out the original mortgage.
This means that there can be no additional borrowing or extension to the mortgage term, and you are only working with what your lender is prepared to offer you. But, Charcol adds, if this is a good enough deal available, you do not have to go through another underwriting procedure and might be able to switch earlier than you expect.
He says: “Some lenders might be happy to let you switch within three months of the end of the deal without early repayment charges.”
