How to give yourself the equivalent of a monthly pay rise
According to Legal & General Mortgage Club’s analysis of 2-year and 3-year fixed rate mortgage data, average rates have fallen 0.2% since the start of 2016.
This has largely been fuelled by the Bank of England’s decision to lower the base rate to 0.25% in August, which was preceded by lenders pricing in the cut by reducing SVRs and fixed rate mortgages to record low levels.
However, despite some reductions in SVRs, Legal & General said around half of lenders have failed to pass on the change to their variable rate products.
“Borrowers on an SVR or coming to the end of their existing mortgage have the potential to save thousands of pounds on their mortgage, the equivalent of a monthly pay rise or a family holiday at half term,” said Jeremy Duncombe, a director at the Legal & General Mortgage Club.
However, in spite of the great deals available, Duncombe said the unpredictable and complicated nature of the mortgage market can make the idea of switching mortgage a daunting task for many borrowers.
How to save by remortgaging
It’s worth checking to see the possible savings you can make by remortgaging. Here are some top tips from comparison site Money.co.uk:
- Equity: Check how much equity you have in your property. That’s how much you own vs the amount you’ve got mortgaged. If you’re not sure what your property’s worth, there are free online sites that can help give you an idea.
- Existing lender: Speak to your existing lender to see what deals it can offer, but don’t commit. If you switch to a new deal from your existing lender, you may still need to be credit checked.
- Fees: It’s not just about the rate, you need to factor in fees too. The Money.co.uk Mortgage comparison tool can help you compare costs so you can see which is cheapest for the amount you want to borrow.
- Surveys and solicitors: If you’re switching away from your existing provider, you may need to pay for a survey and a solicitor, although some lenders will pay towards the costs so be sure to check.
- Independent advice: Speak to a mortgage broker, preferably one that’s independent so they can compare deals from every lender.
- Credit rating: Check your credit report before you apply to make sure it’s accurate and correct any inaccuracies.
- Payslips and bank statements: You’ll need three months’ worth of bank statements and payslips. Lenders look at affordability so it’s worth showing three months of sensible spending to maximise your chances of being accepted.
- Other credit applications: You need to time applications for new credit cards, bank accounts or loans carefully as this could impact your chance of getting the mortgage deal you want.
- Pay fees upfront: If you can afford to pay the fees upfront, this is often cheaper in the long run. Repaying £1,000 for example over 25 years will hugely increase the fee.