SEVERAL high street banks have introduced a change to mortgage rules, leading experts to warn borrowers to “act promptly”.
The lenders have shortened the amount of time customers have to lock in a new interest rate ahead of their current deal ending.
It means homeowners coming off fixed mortgage deals will now need to act with more urgency.
So, if you are a mortgage holder nearing the end of your fixed term, the clock is ticking to negotiate a new offer.
The length of time that a borrower has to secure a new fixed deal is decreasing from six months from the end of their current mortgage to four months.
One by one, major banks have been making the move – with Barclays being the most recent this week.
Here is the full list of banks which have changed their rules:
- Barclays – decreased to three months from September 25
- Halifax – decreasing to four months on a staggered basis from September
- Lloyds – decreasing to four months on a staggered basis from September
- Santander – decreased to four months in June
- Nationwide – decreased to four months in May
Other lenders, such as HSBC, NatWest and Virgin Money still offer customers six months to lock in their new deal.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “This change means that the window of opportunity to secure a new fixed-rate deal at current rates is now shorter.
“Borrowers need to be more proactive and attentive to market conditions to ensure they secure the best possible rates within this reduced time frame.
“It’s advisable for those nearing the end of their current deals or considering a new mortgage to engage with their lenders or seek advice from a mortgage broker promptly.”
An estimated 700,000 loans are up for renewal in the second half of 2024, says industry body UK Finance.
A real concern for borrowers needing to remortgage is how much-fixed rates have risen in the last few years.
The average two-year fixed rate deal has increased from 2.34% in December 2021, to 5.56% as of September 2024.
Meanwhile, the average five-year deal has risen from 2.64% to 5.20%, according to the latest data from Moneyfacts.
The second half of the year has also been marked with repossessions, highlighting the financial struggles many are under right now.
UK Finance says that 980 homeowner-mortgaged properties were repossessed in the second quarter of 2024.
This is an 8% increase compared to the previous quarter and a 31% uplift in the same quarter in 2023.
But it’s not all doom and gloom. There is in fact a positive outlook on the housing market.
The Bank of England reduced the base rate for the first time since March 2020 in August, dropping the rate from 5.25% to 5%.
As a result, lenders have already started to follow suit and drop their fixed rates.
In fact, Nationwide is leading the way, currently offering a 3.74% home purchase plan deal.
Rachel Springall, finance expert at Moneyfacts Compare, previously told The Sun: “Each lender will have their own processes and timescales for getting applications through, so they can change the window of opportunity from time to time to cope with demand, but also as a reflection on changing interest rates.
“Interest rates have been falling, so condensing the window can help lenders avoid re-applications. The same window can extend, depending on the situation of the market.
“Borrowers would be wise to seek out independent advice from a broker to navigate the deals available, but ensure they allow a couple of months to refinance before their current deal ends.”
The move also comes as Barclays announced a reduction in rates by as much as 0.34% for new buyers and those remortgaging.
How far ahead can I lock in a new fix?
- Barclays – three months
- Halifax – four months
- Lloyds – four months
- Santander – four months
- Nationwide – four months
- HSBC – six months
- NatWest – six months
- Virgin Money – six months
Why have banks changed their rules?
The government introduced a new Mortgage Charter in July 2023 to help struggling households.
Lenders who agreed to rules in the Charter were encouraged to raise the amount of time households were given to lock into a new fixed deal to six months.
This was to ensure households had the flexibility to choose a new deal ahead of time and before rates were predicted to shoot up even further.
However, this rule wasn’t compulsory and some lenders already had the policy in place.
Lloyds and Halifax increased the period customers could secure a deal from three to six months in November 2022 – eight months before the mortgage charter.
The group said it has switched to four months because of consumer behaviour and changes in the mortgage markets.
Nationwide and Santander say it’s because mortgage rates are now more stable.
While, Barclays said the move was down to greater stability in the mortgage market, and that over 70% of Barclays customers applying for product transfers did so within the last three months of mortgage terms meaning the extended window was no longer necessary.
What does it mean for customers?
Locking into a new fix deal six months ahead gives homeowners plenty of time to do their research, find the right deal, and plan a budget.
However, if you’re a Lloyds, Halifax, Nationwide, or Santander customer who’s six months away from remortgaging, you’ll now have to wait another two months before you can lock in a deal with your existing provider. Barclays customers will have to wait three.
If you’re looking to lock in a new rate six months in advance, you’ll need to get a quote from another lender.
Although, anyone who has a deal ending soon should speak to a broker to assess their options.
If your mortgage is due to expire in less than four months, the recent changes won’t make your situation any worse or better and you’ll be able to lock in a new deal from this point on.
Either way, borrowers can still check if they can still ditch their deal penalty-free and switch to another provider in case interest rates drop.
In effect, sticking with the same lender becomes an insurance policy for the borrower, as long as they can get out of it.
Different types of mortgages
We break down all you need to know about mortgages and what categories they fall into.
A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.
Your monthly repayments would remain the same for the whole deal period.
There are a few different types of variable mortgages and, as the name suggests, the rates can change.
A tracker mortgage sets your rate a certain percentage above or below an external benchmark.
This is usually the Bank of England base rate or a bank may have its figure.
If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.
A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.
SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.
Variable rate mortgages often don’t have exit fees while a fixed rate could do.
How to get the best mortgage deal
If your mortgage deal is nearing the end of its term, you should start to compare rates now and speak to a mortgage broker to assess your options.
It is then worth speaking with your current lender to see what deal they might be able to offer you.
Getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
Once you have taken a look at all your different options, you will want to consider the most important aspects.
These include your current rate, the terms and length and any exit fees, as well as your loan-to-value (LTV).
When your fixed rate ends you will automatically roll on to your lender’s standard variable rate (SVR), and these often are considerably higher than a standard fixed rate.
These can be as high as nearly 8% so switching before the end of your current term is a high priority.
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