be free of early repayment charges (ercs). a few of the building societies still
charge interest to the end of the month and so borrowers with
these lenders will need
to time completion of their remortgage for the end of the month.
Who should consider remortgaging? anyone paying an SVr of 3.5% or higher whose LtV is 85% or less, providing: they have no adverse credit. they don’t need to self certify their income.
Who shouldn’t consider remortgaging? anyone who has reverted to Woolwich’s lifetime tracker rate of Bank rate + 0.95%, who is paying intelligent Finance’s SVr or the old SVrs of nationwide, cheltenham & gloucester, Lloyds tSB (all 2.5%), Bank of ireland or Bristol & West (both 2.99%), unless they want a fixed rate. anyone with adverse credit, unless it is very minor, or who can’t prove their income. Probably the most important consideration when remortgaging is whether to switch to another variable rate, in all probability a tracker, or a fixed rate. Lifetime tracker rates are very similar to the rates available on short term trackers and generally have similar or lower ercs. therefore for borrowers wanting to switch to another variable rate we would generally recommend a lifetime tracker.
the savings that can
be made are now very impressive. at a time when the entire nation is being prepped for significant cuts in all areas of life, cutting what for most will be their largest single financial commitment just makes undeniable sense. as an example for a remortgage fee of £1,499 someone with a £250,000 mortgage on northern rock’s SVr would save the following per month, based on current rates: up to 70% LtV: £396 up to 75% LtV: £333 up to 80% LtV: £271 up to 85% LtV: £167 Some borrowers will prefer
a fixed rate, in which case we would generally recommend a longer term fix, i.e. for 5 or 10 years. the initial monthly savings will be smaller switching to a fixed rate but many borrowers with LtVs up to 75% will find they can switch to a 5-year fix with little or no increase in their monthly payment. depending on LtV
the initial interest rate differential between a 5-year fixed rate and a tracker will be in the region of 1.5% and between a 10-year fix and a tracker about 2.5%. a tracker will clearly
be cheaper in the short term, whereas a 5 – 10-year fixed rate offers certainty of monthly payments for a reasonable period. a 2 or 3-year fixed rate looks less attractive as a remortgage option because it will be more expensive than a tracker and only offers certainty of monthly payments for a short period, whereas the further ahead one looks the
mortgage introducer JULY 2010 17
more difficult it becomes to forecast interest rates.
Product transfers Finally, some lenders offer product transfer deals to existing customers, either on the same terms as are offered for new customers or on different terms, which are sometimes better but more often worse than the generally available rates. any clients considering
remortgaging should check what their existing lender will offer, but borrowers with lenders who have increased their SVr for new customers, i.e. nationwide, cheltenham & gloucester, Lloyds tSB, Bank of ireland and Bristol & West, should bear in mind that if they remortgage or take a product transfer they will permanently lose the right to their current cheap SVr.
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