Should I apply for a remortgage early or wait to see if rates fall?  

My current two-year mortgage deal ends in June next year. I regret opting for such a short fix, but I could never have foreseen that rates were going to rise so quickly.

I understand that I can apply for a remortgage up to six months ahead of the current mortgage deal ending. 

Should I therefore look to lock in a mortgage deal at the start of next year, or would I be better off waiting until the last minute in case rates improve?

Alternatively, are we able to lock in a deal early and if rates improve cancel and go for something else? And if so, might this hurt our credit file?

Tough call: Many homeowners will be approaching the end of their fixed mortgage deal and wondering what to do given rising rates

Ed Magnus of This is Money replies: There is no point beating yourself up for not choosing to fix for longer than two years.

Hindsight is a wonderful thing, but after more than a decade in a low and stable mortgage rate environment, nobody could have predicted how fast rates would rise this year.

Applying to remortgage ahead of time is a sensible move given how erratic the market has been this year.

Many people don’t know they can often secure a new mortgage deal – and lock in the rate – up to six months before their current deal ends.

This is because most remortgage offers are valid for between three and six months.

From the point of application, a remortgage offer can typically take a month to come through so this means it would be wise to speak to a mortgage broker seven months before an existing fixed deal ends.

If your mortgage deal ends in June, that means it would be worth speaking to a mortgage broker even as early as December.

Typically, only once the mortgage completes, and the mortgage deed is signed, is someone contractually committed to the new mortgage.

Between the mortgage offer and that completion date, mortgage holders are therefore usually free to change to a cheaper deal if they prefer.

We spoke to Chris Sykes, a mortgage consultant at broker Private Finance, and David Hollingworth, associate director at L&C Mortgages, to get their advice. 

How early should you remortgage?  

Chris Sykes replies: A lot of people are in the same boat now, regretting their two-year fixed rate choice, but now you just have to make the best decision for you moving forward.

The key here is that you are not committed to taking a new mortgage if you get a mortgage offer.

We advise most clients who are remortgaging to review six or seven months before their current rate is due for renewal, as at that stage an application can generally be placed and rate locked in.

If rates then increase you are secured against them and if rates decrease you can always cancel the application and re-apply to a new rate.

David Hollingworth replies: Many lenders’ mortgage offers will be valid for up to six months, which means that you could start your application in the new year.

That would seem like a useful thing to do even if you ultimately prefer to wait a little longer, as it will help you gauge where rates are.

You could still have the chance to switch deal. You could change to a new improved rate from the same lender, or even start over with a different lender.

It’s important to factor in any upfront fees that may have been paid, however, as those would be unlikely to be refundable if you changed to a new provider.

Waiting until the very last minute is not advisable, as it does take time to move from application to the point of completion and it makes sense to have things lined up well in advance.

Even if you do hold off, then starting the review three months before the end of the current deal will still make sense to avoid rolling onto a standard variable rate.

Does making too many mortgage applications affect your credit rating?

David Hollingworth replies: Applying for a mortgage requires a credit check and lots of search footprints can hurt someone’s credit score.

However, a couple of searches over a six month period is unlikely to result in serious damage.

Mortgage applications do involve a credit search and too many credit searches will impact your credit file, but a couple of applications shouldn’t have a large negative impact

Mortgage applications do involve a credit search and too many credit searches will impact your credit file, but a couple of applications shouldn’t have a large negative impact

What upfront costs are involved?  

Ed Magnus replies: Securing a mortgage offer can cost money, but this can be entirely avoidable.

Mortgage brokers earn commission from the lenders, but some also charge clients fees, while others are fee-free.

Some mortgage brokers may charge a fee for securing an offer, so always check this with them before applying. 

Aside from fees paid to your broker, some mortgage deals also include an arrangement fee. These are fees lenders charge borrowers for setting up their mortgage, and they typically range from nothing at all to around £2,000.

You can choose to add the fee to the mortgage or pay it off immediately. If you think you might switch mortgage deals later on, it is vital here that you add the fee to the mortgage. 

This means you won’t have to pay it if the mortgage doesn’t end up going ahead.

Other fees that lenders might charge include a non-refundable booking fee, paid at the point of application and typically ranging between £100 and £250.

There could also be a valuation fee and some legal fees to take into account.

A mortgage valuation fee can vary depending on the value of the property. It will typically cost between £100 and £400, but in many cases it will be offered for free as part of the mortgage deal. However, if a fee is included, you will need to pay this upfront.

Some basic legal work is also required to pay off the current mortgage, remove the original lender from the property title and replace it with the new lender.

However, in most instances the basic legal work will be included for free as part of the mortgage deal, or some cashback will be made available to cover costs.

The free service is very basic, so if any additional work is required, such as adding or removing a partner from the mortgage, then you may be required to pay extra.

What about doing a product transfer? 

Ed Magnus replies: If, after doing some research, you find that the best available mortgage is with the same lender you are already using, it may make sense to do what is known as a product transfer. 

This is when you simply move from one mortgage product to another product with the same lender.

A product transfer also allows you to skip additional fees, as you won’t typically have to pay legal and valuation costs.

It can also be faster than a remortgage. A product transfer will typically take a matter of days whilst a remortgage can take weeks or even months to complete. 

This means it won’t be worth applying further than six months ahead of your existing deal ending.

Another thing to watch out for is that some product transfer offers will only be valid for three months rather than six months.

Upward pressure: Many homeowners and homebuyers will be fearful that the base rate hike will spell further mortgage rate rises

Upward pressure: Many homeowners and homebuyers will be fearful that the base rate hike will spell further mortgage rate rises

Chris Sykes adds: With product transfers it all depends on your lender, as some allow you to lock in six months in advance, but others only three months. If the offer is valid for six months then it will be worth reviewing.

If you decide to stay with your current lender, it is worth making sure the deal is cancellable before the renewal date, as not all are.

If the offer is valid for just three months, then perhaps it is worth putting in an application six months ahead with a new lender, and then re-reviewing three months before including in that research your existing lender.

Although again, there could be costs to that initial application so it is case by case.

I’d say that either way it is best to seek some professional advice, at least six months early. 

Will mortgage rates come down?

Ed Magnus replies: The average two-year fixed rate mortgage is now 6.41 per cent, according to Moneyfacts. This time last year the average deal charged 2.29 per cent.

On a £200,000 mortgage being repaid over 25 years, that’s the difference between paying £1,339 a month and £876 a month.

Many will be fearing that mortgage rates may continue heading higher. After all, the Bank of England is likely to continue raising the base rate over the coming months in its bid to bring inflation to heel.

However, there are already signs that the tide may be turning for mortgage rates. The Governor of the Bank of England Andrew Bailey said last week that he expects the bank rate to go up by less than what is currently priced into the financial markets.

The average two-year fixed mortgage rate is now 6.41 per cent with a five-year fix at 6.2 per cent

The average two-year fixed mortgage rate is now 6.41 per cent with a five-year fix at 6.2 per cent

This suggests that the fixed rate mortgage market may have already peaked, despite further base rate rises on the horizon.

It’s worth noting that the average two-year and five-year mortgage rate reached a high of 6.65 per cent and 6.51 per cent on 20 October.

However, since then, the average rate has been steadily reducing. The typical two-year deal now charges 6.41 per cent and the average five-year fix charges 6.2 per cent.

This is because a number of lenders have reduced their rates during this time, including Nationwide, HSBC, Platform and Virgin.

Chris Sykes adds: We are currently seeing some lenders reduce their fixed rates a little.

Institutional lending rates no longer reflect the highs seen after the mini-Budget, but many fixed rates are still priced that way.

Obviously this could change as quickly as it did before. However, when rates do reduce they tend to reduce slowly because lenders do not want to attract every single bit of business in the market and be inundated.

What to do if you need a mortgage 

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, have been urged to act but not to panic.

Banks and building societies are still lending and mortgages are still on offer with applications being accepted. 

Rates are changing rapidly, however, and there is no guarantee that deals will last and not be replaced with mortgages charging higher rates. 

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value

What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. 

Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal. 

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for 

Best mortgages

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