Mortgage lenders call people who switch mortgage lenders to
follow lower rates ‘Rate Tarts’ - as if that’s going to put them
off! These are tarts with brains (not hearts) as we all know
that the best way to get the cheapest deal is to shop around,
and that’s what they’re doing!
The mortgage lenders are in heavy competition with each other to
attract the most customers, and although some offer other
incentives like free valuation and set up fees, it’s the
interest rate that’s the real clincher. As long as this is the
case, Rate Tarts will prosper!
Some lenders have increased their up-front charges in an attempt
to beat the Rate Tarts, and others offer incentives to existing
customers to retain their business. However, raising up-front
charges will do more harm than good, reducing the lenders market
share, even though their profit margins might be a little more
healthy.
Birmingham Midshires are the perfect example of this, they are
currently offering a 3.89% two year fixed deal, looks like a
great deal? Read the small print and it turns out that the
arrangement fee is vastly over the average of £500, it’s a
gargantuan £1,499! If you spread the fee over two years at
£749.50 per year, it’s works out as adding another 0.75%
interest on a £100,000 mortgage.
If you decide to remortgage, there’s a couple of things you need
to do first:
1. Add up all the costs of remortgaging, including:
- the valuation fee (around £250 on a £100,000 mortgage); - the
arrangement fee (around £500); - a booking fee (could be around
£50?); - legal fees (approximately £350 on a £100,000 mortgage);
- the cost of any redemption penalties for leaving your current
lender.
2. Now it’s time to call your mortgage provider. Tell them that
you want to switch your mortgage because you have found a better
deal. Your lender may well offer you a deal to match the new
deal. Of course, if you didn’t ring, they’d never offer you that
better deal, but lenders sometimes respond well to pressure, so
give that a try before switching.
Once you have talked to your lender and have details of all
costs involved with switching mortgages, it’s up to you to
decide if it’s worth it. If your lender does provide you with an
improved quote, that should make the decision a lot easier.
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