New deals encourage remortgaging

Mortgage borrowers sitting on their lender’s standard variable rate (SVR) are being advised to consider remortgaging their loan after a number of attractive deals were launched this week.

Mortgage brokers said the launch of several low fixed and tracker rates in the past couple of weeks meant that most borrowers currently on their lenders’ SVR – the rate customers revert to when their mortgage deal comes to an end – can now save money by remortgaging.

The number of homeowners remortgaging has plummeted over the past year, with most borrowers opting – or being forced – to stay on their lenders’ SVRs, which are often lower than new refinancing deals available in the mortgage market.

According to figures from the Council of Mortgage Lenders, remortgaging accounted for just 25 per cent of loans in August, the lowest level in over 10 years.

However, Ray Boulger of John Charcol, the mortgage broker, said he had seen an increase in the number of borrowers remortgaging over the last few weeks. Remortgages and product transfers represented 53 per cent of the firm’s business in September, compared to only 40 per cent in previous months.

“With the launch of some extremely low fixed and tracker rates in the past couple of weeks, which are close to the cheapest SVRs, remortgaging will mean cheaper monthly mortgage payments for many borrowers so it’s finally worth taking the plunge,” said Melanie Bien of Private Finance, the upmarket mortgage broker.

On Monday, Barclays launched a new mortgage deal in a bid to expand its share of the mortgage market by tempting borrowers off their lenders’ SVR.

The offer is a lifetime tracker at a rate of 2.68 per cent – bank base rate plus 2.18 per cent – available up to 70 per cent loan-to-value. The deal has no application fee, free legal work and valuation as well as a £300 cashback.

Borrowers can also switch to any of Barclays’ fixed-rate mortgage deals with no early repayment charge as part of the lender’s “switch-and-fix” mortgage offer.

Royal Bank of Scotland has also launched two attractive deals this week. It has a two-year tracker at a rate of 1.99 per cent – bank base rate plus 1.49 per cent – available up to 60 per cent loan-to-value, with a £499 fee. It also has a five-year fixed-rate at 3.99 per cent, available up to 60 per cent loan-to-value with no fee. Both deals have a free remortgage valuation and legal service.

“The key message is that anyone on any lender’s standard variable rate can now save money by remortgaging, even those on the Lloyds Banking Group or Nationwide’s 2.5 per cent rate,” said Nigel Bedford of Largemortgageloans.com.

For those wanting to remortgage to a fixed-rate loan, there are a number of attractive five-year fixes currently available. ING Direct has a five-year fixed rate at 3.69 per cent, available up to 60 per cent loan-to-value (LTV) with a £1,945 fee. Natwest has recently launched a five-year deal at 3.75 per cent with a £699 fee, but borrowers must have 50 per cent equity in their home.

Mortgage brokers said there are other “pressing concerns” that may convince borrowers to remortgage in the near future.

“If house prices fall, homeowners will want to remortgage sooner rather than later before their loan-to-value rises, making it harder to remortgage at a later date,” said Bien. “And future austerity measures mean that homeowners’ financial situations are likely to get worse, not better, so fixing now will bring security and help with budgeting.”

Boulger believes borrowers on rates below 3 per cent will get little value in remortgaging unless they want a fixed-rate, whereas those paying higher rates should definitely consider it.

It is important to factor in fees when comparing a remortgage deal. “The general rule is the higher the rate you are paying and the lower your LTV, the more worthwhile it is to remortgage,” he said.