Consider A Standard Variable Rate
Fixed rate mortgages and accompanying arrangement fees are continuing to increase, but SVRs and Trackers tend to follow the Bank of England base rate. The gap between the two types of mortgage is closing, and SVRs and Trackers are looking like a good option in some cases.
As arrangement fees and fixed rate interest rates on mortgages continue to rise, wily borrowers are beginning to look at alternatives. Are there any remortgages with no or low fees?
Yes, there are. If you already have a mortgage and you are on a fixed rate, then changing lenders or renegotiating a new fixed rate will probably cost you in arrangement fees and your interest will go up too. Surprisingly, the much-maligned standard variable rate (SVR) may now prove better value. Having been warned off the lenders’ SVRs for many years, borrowers are now seeing the gap between fixed rates and SVRs shrink – and, if you stay with the same lender, and come off your fixed rate onto the SVR, it will cost you nothing in arrangement fees – because you’ve already got the mortgage; it was part of your original deal.
As well as SVRs, some lifetime tracker deals also have low fees and no early repayment charges, so they look attractive too.
SVRs and tracker deals tend to move in line with the Bank of England base rate (plus a few points), so these have come down in the last seven months, whereas fixed-rate deals have continued to increase as they are more driven by the swap rate.
Two-year fixed rates have reached a ten-year high of 6.75%. In comparison, Halifax’s SVR is 7.1%; Nationwide’s is 6.49%; First Direct’s is 6%.
If you take these rates into account and then also add in the cost of arrangement fees – now averaging £860, compared with £560 in September 2006 – then it is certainly worthwhile doing your sums, especially if you do not have many years of your mortgage to run.
By choosing a standard variable rate deal or lifetime tracker, you will avoid up front fees, and you may benefit from free valuation and legal fees on remortgages. Indeed, if you stay with your existing mortgage and simply “fall onto” the SVR, no valuation or legal fees will be necessary. In addition you are free to leave at any time with no early repayment charges.
In a similar way most of these deals will also allow you to overpay unlimited amounts and you may be able to underpay if you have already overpaid.
