Are you a Nationwide or Santander mortgage holder? Well, brace yourself; you’ve got a shorter window now to secure a new rate before your current deal expires. The previous six-month period for locking in a new rate has shrunk to just four months. This change means you have less time to safeguard against potential rate hikes before your existing mortgage term ends. Fixed mortgage rates have been climbing steadily this year, although there’s speculation about a base rate cut looming on the horizon.
In the past, almost every UK mortgage lender allowed existing borrowers to lock in a new rate up to six months before their current deal ended, thanks to the government’s “mortgage charter” introduced in June 2023. This initiative aimed to offer borrowers more flexibility during a period of volatile mortgage rates.
Nationwide and Santander, however, are bucking the trend by shortening this window from six months to four. They attribute this change to a perceived stabilisation in the mortgage market and a lack of borrowers opting for early rate locks. Before the 2022–23 period, a four-month product transfer window was the norm. Ray Boulger, from broker John Charcol, commented: “With the rate frenzy calming down, it’s reasonable for lenders to reassess the product transfer window duration.”
This adjustment comes amid a continued rise in fixed mortgage rates throughout much of 2024, though they seem to have reached a plateau for now. Currently, two- and five-year fixed deals are starting at 4.78% and 4.31%, respectively. While a drop in fixed mortgage rates could follow a cut to the Bank of England’s base rate, currently at 5.25%, such a decrease is not widely expected at the upcoming base rate meeting on June 20.
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Commencing the mortgage-switching process: A strategic move
As your mortgage deal approaches its end, it’s prudent to take action early. Failing to secure a new rate in time could mean transitioning to your lender’s standard variable rate (SVR), a move that could see you facing interest rates ranging from 7.5% to 8.5%.
Fortunately, as discussed earlier, you can typically secure a new rate up to six months before your current one expires. This applies whether you opt for a product transfer with your existing lender or a remortgage with a different one. Locking in a new deal ahead of time not only shields you from the burden of an expensive SVR but also serves as a hedge against potential interest rate hikes. Should rates climb during this interim period, you’ll have locked in a more affordable deal. Conversely, if rates drop, you often have the flexibility to switch to a better deal without incurring penalties, securing a lower rate closer to your deadline.
Key considerations when locking in early
Before finalising a new mortgage deal ahead of schedule, whether through a product transfer or remortgage, it’s essential to consider the following:
- Upfront fees: Determine if you’re required to pay fees upfront to secure the rate. Such fees could limit your ability to switch to a better rate, penalty-free, if a superior offer arises later on.
- Ditching period: Be aware of any stipulated timeframe within which you’re allowed to cancel the deal without penalty. Most lenders impose a cut-off period, typically 14 days or less, before the new rate takes effect.
- Concurrent mortgages: Avoid the pitfall of inadvertently having two mortgages set to commence simultaneously. This scenario may arise if you secure a new rate with your existing lender but then opt for a different deal elsewhere without cancelling the initial arrangement. Failure to rectify this oversight in a timely manner could result in substantial early repayment charges, potentially costing thousands of pounds.
By proactively navigating these considerations, you can maximise the benefits of locking in a new mortgage deal early, ensuring financial prudence and peace of mind as your current arrangement draws to a close.