Now is the time to review your mortgage

J Finance Mortgage review

Mortgage deal ending?

After the first interest rate rise in a decade, homeowners with mortgage deals that are coming to an end need to make a decision about their new mortgage product…

Following the interest rate rise in November, all homeowners should take a little time to review their situation.

Borrowers who have a fixed rate or tracker rate mortgage deal coming to an end, need to think carefully about their new mortgage product. Those with a lender’s standard variable rate should also consider their options.

Fixed-rate mortgages have been hugely popular over the past decade and, according to The Bank of England, account for 60% of the UK mortgage stock.  The advantage of a fixed rate is that you know exactly how much will leave your account each month for the next two, three or five years. It’s stress-free and ensures you are not at the mercy of the Bank of England Monetary Policy Committee should it decide to up interest rates.

Tracker rate mortgages have also been attractive, especially to those that wanted to save money and were unconcerned about interest rates rising. While typically cheaper and often a money-saving option over the past 10 years, that may well change.

Furthermore, it is estimated that about 3 million UK borrowers are sitting on their lender’s standard variable rate. Not only are these likely to be subject to increase as Bank Base Rate rises, they are typically considerably higher than fixed and tracker rates.

A recent very small rate rise (from 0.25% to 0.5%) was the first in over a decade and, if your existing mortgage deal is coming to an end, it’s important you look around for a good deal to avoid any further rate rises (which are being predicted).

Stick or twist?

So, the first question you need to ask is whether you should stick with your existing lender or shop around for a better offer from a rival.

You also need to consider whether you will opt for a fixed rate or tracker mortgage (which will go up or down alongside the interest rate). With the predicted rise in rates, a fixed rate looks like the better deal. Your rate of interest will be slightly higher but is not at any risk of rising rapidly alongside any number of rate rises from the Bank of England.

However, you also need to be aware that many rates come with mortgage fees and that lenders eligibility criteria have been tightened, to protect the financial institutions (and buyers) from offering loans to those who cannot afford them. New guidelines from the Bank of England mean that you may also have to undergo affordability tests even if you are renewing a deal with the same provider. A stress test, for instance, will consider whether you can afford a mortgage should the rates rise by as much as 3 per cent (even if this will be two-to-five years down the line).

Getting the best deal

Take a look at our step by step guide to getting the best deal:

  • Talk to an independent financial adviser, such as J Finance Ltd (see our details below) about your circumstances and what you hope to achieve. All will have the information at their fingertips and usually have a good knowledge about lenders and who will offer the best deals according to your circumstances.
  • You need to take into account whether your circumstances have changed. Maybe you have gone part-time, become self-employed or have expenses you didn’t have when you first took out the mortgage. This may make it harder for you to find a mortgage with a new provider.
  • Start shopping around early. Give yourself time to compare and contrast – you may even be able to sign up to a current deal, even though you are not going to put it into effect for another few months when your current mortgage ends.
  • Find out if your existing lender will offer you a good rate – some will do this to keep hold of existing clients – or they may offer a cashback incentive to stay with them. Then take this information to an independent adviser to find out if they can improve on what you have been offered.

In most cases doing nothing will result in the mortgage reverting to your lenders standard variable rate, so it’s best to do your homework three to four months before your current mortgage expires. Some lenders will fix a new deal up to six months ahead.

Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across the South of England including Oxfordshire, Buckinghamshire and Hampshire. If you would like to discuss this subject or any other financial matter, without obligation, please contact us on 01635 521 300 or