In recent times, there’s been an increase in homeowners opting to ‘port’ their fixed-rate mortgages when moving to a new house. This strategy allows borrowers to carry their existing mortgage, with its potentially lower interest rate, to their new property. Given today’s climbing interest rates, often above 4%, this move can offer significant financial benefits. Back in the summer of 2021, for instance, some lucky borrowers secured deals with rates under 1%.
Why Consider Porting?
This year, approximately 1.6 million people in the UK face the end of their low-rate fixed mortgages, some as low as 2%, only to confront current rates hovering between 4 and 5 percent. Porting offers a way to maintain these lower rates while relocating, avoiding hefty early repayment charges that can arise if the lender doesn’t permit the mortgage transfer.
Most fixed-rate mortgages include early repayment fees, which can range from 1 to 5 percent of the outstanding loan if refinanced prematurely, often occurring during home moves. Chris Sykes, a technical director at Private Finance, notes a surge in porting due to people wanting to retain their low historic rates. Similarly, David Hollingworth from L&C Mortgages reports a 50% rise in porting cases, indicating its growing popularity among homeowners.
The Challenges of Porting
Porting isn’t always straightforward. Even if a mortgage is technically portable, it doesn’t guarantee ease in transferring it to a new property. Financial changes or a new property not meeting the lender’s criteria can complicate matters. Borrowers face the same scrutiny as with a new mortgage application, and changes in personal circumstances or lender criteria can pose hurdles. Timings are also crucial, with many lenders requiring simultaneous sale and purchase to avoid penalties, though some may allow a short gap.
Porting can be risky, particularly if there’s a delay in reclaiming early repayment charges. It’s also not ideal for those needing additional funds for their new purchase, as extra borrowing must come from the same lender, possibly at less competitive rates. This situation might lead to a divided mortgage with different end dates or higher rates in the future.
The Importance of Professional Advice
Given the complexities, consulting a mortgage broker early on is crucial. They can identify potential issues and guide you through the porting process. Remember, if your application to port is declined, or the new property doesn’t meet your current lender’s standards, you might lose the opportunity to port, underlining the importance of expert advice.