We often talk and write about the importance of making sure you start to plan early when it comes to managing your mortgage.
Although the stricter regulatory environment that’s evolved since the economic crisis began in 2008 has resulted in much greater protection for borrowers and lenders alike, those who already have a home loan can still be tripped up by failing to plan for the end of a fixed deal.
Typically, your lender may give you between 8- and 12-weeks’ warning of your fixed loan coming to an end.
Fixed deals give homeowners certainty over their payments and, as a result, can prove cheaper over the long run if a rise in interest rate would otherwise result in higher repayments.
But while the post-2008 regulatory changes have brought changes in the way banks and building societies lend and the criteria they use to assess affordability, it’s still the responsibility of borrowers to look for a better deal at the end of their fixed term – your lender won’t do it for you.
The danger for borrowers in delaying is that when your existing mortgage deal does come to an end, your lender will simply move you to their standard variable rate (SVR), which may well be more expensive than the one you’re currently on.
The result of that is you’re going to pay more over the lifetime of your loan than you would do if you switched at the end of your existing deal.
The reality, though, is that for many people the prospect of remortgaging to a new deal – either with your existing lender or a different one – can be a source of some anxiety.
Most lenders now treat a remortgage as a new application, so the days of ringing up your lender and simply asking to be moved to their cheapest rate are long gone.
As a result, people worry about all sorts of issues from whether they’ll meet the stricter affordability criteria to whether they’ll be able to find or provide the paperwork they need to complete their application.
In fact, a 2018 survey suggests 41% of people find the application process to be stressful, so it can end up being one of those things people keep putting off until tomorrow.
The truth is the application process can be quick provided you have all the information you need easily to hand, but leaving everything to the last minute is likely to simply increase your stress levels rather than reduce them.
So, we always encourage our clients to take early action to ensure they transition smoothly from their existing mortgage product to a new one.
And working with a professional mortgage broker can relieve most of the stress anyway, because your broker should be working with you to ensure you have the right documents and to pre-assess your financial circumstances to ensure you have the best possible chance of your application being approved.
If you’re currently within six months of the end of your existing fixed deal, this is a good time to begin thinking about switching.
Some lenders – Barclays, Nationwide and Santander among them – are trialling schemes that allow their existing customers to agree a new fixed deal up to 6 months before their current one ends.
Clearly that’s more to do with lenders improving their customer retention rates than it is altruism on their part, and it’s not necessarily the case that the deals they offer will be right for you.
As is the case with any financial commitment you make, it’s wise to consider carefully whether the deals available from your existing lender are right for your particular needs and circumstances.
A good mortgage broker will be invaluable to you in making that decision.
But if you decide those products are appropriate for you, then agreeing a deal now that will be come into effect in the New Year could make some sense.
Given the likelihood of interest rate rises in the future, one of which could arrive before we see in 2020, even fixed mortgages could be more expensive in January than they are now.
Having a clear plan to ensure you enjoy the benefit of the best possible mortgage deal is crucial if you want to futureproof your repayments and ensure you don’t end up paying far more than you need to.
At Oportfolio, we’re mortgage experts and can help you to make decisions about your finances that not only suit your circumstances today, but also take into account your plans and aspirations for the future.
Why not give us a call to talk to us about your current mortgage arrangements and find out how our experience, expertise and access to products you won’t find on the High Street or online can help you to make the most of your mortgage.
And to learn about some of the things you’ll need to consider as you plan, take a look at our short guide to remortgaging.
To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.