Navigating the world of mortgages can be complex, especially when deciding whether to stay with your current lender or switch to a new one. Recent data suggests that, contrary to popular belief, loyalty to your current mortgage lender might actually save you money.
Understanding Mortgage Rates: The Loyalist Advantage
The cornerstone of this discussion is a recent revelation by MPowered Mortgages. Their data indicates that borrowers who choose to stay with their current lender when remortgaging (a process known as a ‘product transfer’) often receive more favorable rates compared to those who switch.
The Impact on Your Wallet
Consider a borrower with a 60% loan-to-value (LTV) mortgage. If they were to remortgage with a new lender, they might secure a rate of about 5.71%. In contrast, sticking with their existing lender could bring this down to around 5.31%. On a £200,000 mortgage over 25 years, this difference translates to a monthly saving of £47, or £564 annually.
Rate Comparisons Across Different LTVs
The trend of better rates for staying put extends across various LTVs:
- 60% LTV: 5.71% (new lender) vs. 5.31% (existing lender)
- 65% LTV: 5.7% vs. 5.72%
- 70% LTV: 5.86% vs. 5.56%
- 75% LTV: 5.83% vs. 5.56%
- 80% LTV: 5.85% vs. 5.58%
- 85% LTV: 5.95% vs. 5.60%
- 90% LTV: 6.48% vs. 6.44%
- 95% LTV: 6.49% vs. 6.49%
The Strategy: Compare and Consult
Although these figures suggest benefits in staying with your existing lender, it’s crucial to still compare market rates. Here’s how:
- Use a Mortgage Finder: Tools like ‘This is Money’ mortgage finder can provide a comprehensive view of available rates.
- Consult Your Current Lender: Understand what your lender is willing to offer you.
- Engage a Mortgage Broker: They can provide fee-free, no-obligation advice and help compare across the market.
- Make an Informed Decision: Weigh your options, considering potential lock-in periods or flexibility to switch if rates drop.
Why Borrowers Stick with Current Lenders
There’s a growing trend towards loyalty in the mortgage market. According to UK Finance, 84% of remortgagers stayed with their current lender in a recent quarter. Why? The reasons are manifold:
- Avoiding Additional Checks: Staying put can bypass extra affordability checks and associated costs.
- Ease of Process: Product transfers usually involve less paperwork and no new property valuation.
- Cost Savings: There are typically no additional fees or solicitor costs involved.
- Eligibility Requirements: To qualify, you should be current on payments, nearing the end of your term, and not seeking additional borrowing.
Expert Advice: Don’t Go Blindly
David Hollingworth from L&C Mortgages advises against blindly accepting your current lender’s offer. The market is fiercely competitive, and lenders frequently adjust rates. He suggests using a broker to ensure you are getting the best possible deal from all available options, often at no additional cost.
Concluding Thoughts
Staying loyal to your lender might be more beneficial than switching. However, it’s essential to stay informed, compare rates, and seek professional advice to make the best decision for your financial situation. Remember, the mortgage market is dynamic, and what works best for you today might change tomorrow.