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Banks are increasingly allowing mortgage borrowers to lock into a new deal earlier to keep their business and discourage them from switching lender.

Millions of fixed-rate deals are coming to an end over the next 15 months and after six consecutive Bank of England interest rate rises since last December homeowners are getting their skates on.

“We regularly get calls from homeowners whose mortgages finish in a year’s time and they want to know what’s happening to rates,” said Aaron Strutt from the mortgage broker Trinity Financial. “They ask how they can lock into a new deal early and how much it’s going to cost for them to get out of their current deal.

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“Lenders are making it easier to switch early so borrowers can lock into the current rates. With the scale of price hikes from the biggest lenders, prices will be much more expensive in a few months.”

Usually, there’s a mismatch between how early you can secure a deal with a different lender and when you can remortgage with your existing lender, in what is known as a product transfer. You can secure a new deal elsewhere up to six months before your current deal ends but a product transfer is normally only allowed up to three months early.

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Nearly 70 per cent of all remortgaging deals involved a product transfer in the first three months of this year, according to banking trade body UK Finance.

With mortgage rates having risen rapidly since the end of last year, borrowers want to lock in new rates as soon as they can before rates go up further. In January the average rate on a two-year fix was 2.52 per cent and on the average five-year fix it was 2.71 per cent, according to Moneyfacts; now they are 4.24 per cent and 4.33 per cent respectively.

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There were 329,510 remortgages approved between January and July, according to the Bank of England, up 36 per cent on the same period last year.

Last Thursday, Barclays told existing borrowers they can secure a new rate with the bank five months before their current deal ends, up from three months. The previous week, HSBC increased its switch window from three months before a deal ends to four, and in July NatWest increased its window from four to six months.

This is especially good news for borrowers who may fall foul of tighter affordability criteria and be unable to borrow as much from a different lender because they will always be able to switch products at their current bank.

By George Nixon

Source: The Times

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