Looking to buy or remortgage but don’t want to miss out on the expected fall in mortgage rates?

Posted on 6 July 2016

Be the first to comment


Many experts in the housing market believe that following the UK’s decision to leave the EU there will be a fall in interest rates. If you’ve heard this and are putting off remortgaging, purchasing a home or speaking with a mortgage broker until rates do fall, then you shouldn’t!

There are two strategies that can help ensure you get the best rate now, with the flexibility to switch to a better rate should it become available in the near future:

Droplock:

This is a mortgage which starts off as a tracker and benefits from any cut in Bank Rate but allows you to switch into any fixed rate the lender offers if and when you choose to do so. You can do this without incurring any early repayment charges (ERCs) and with the only cost being the fixed rate arrangement fee. Nationwide, Santander, Tesco, Virgin and Woolwich all offer this facility on some or all of their trackers.

Product switching prior to completion:

Some lenders will allow a borrower who has applied for a fixed rate to switch to a new cheaper deal, even after the mortgage has been offered. The only stipulation is that you can’t have yet completed your property purchase or remortgage. In most cases there is no cost for doing this, but some lenders do charge a small admin fee.

The benefit to borrowers is that if they submit an application now then they can secure the best rate currently available, but should rates fall during the application process, you can switch to the new lower rate. On the reverse, if rates do rise, your mortgage offer is locked in at the agreed lower rate.

Mortgage lenders who offer product switching include:

Lender
Mortgage in principle offer period

Allow you to switch to a better rate?

Administration fee for switching mortgage offer
Accord6 monthsYes£90
Aldermore80 daysYesNil
Barclays6 monthsYes£150
BM Solutions6 monthsYesNil
Clydesdale90 daysYesNil
Coventry & Godiva4 months on purchase 6 months on remortgageYesNil
HalifaxWithin completion date stated on productYesNil
Metro3 monthsYesNil
Nationwide6 months on purchase 3 months on remortgageYesNil
NatWest3 monthsYesOriginal product fee non refundable
Post Office6 monthsYesNil
SantanderWithin completion date stated on productYes£199
Scottish Widows90 daysYesNil
Tesco90 daysYes£195
The Mortgage Works6 monthsYes£350
TSBWithin completion date stated on productYesNil

If you have a question on fixed rate or Droplock mortgages call us on: 0344 346 3708  or request a call back here.

Comments

Post a Comment

Please keep your comments relevant. Charcol reserves the right to edit or delete comments.

The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We may contact you in response to your comment – by submitting your comment, you are consenting to this.

To find out more about how we collect, use and protect your data, please read our privacy policy.

You are currently offline. Some pages or content may fail to load.