By David Knight, Director of The Mortgage Branch 
 
Firstly, I’ll start off by saying that, based on industry statistics, there are a huge number of mortgages on what is called the Standard Variable Rate. 
 
This is possibly the highest rate that the lender has, and will be higher than products that they will offer to both new borrowers and to existing borrowers wishing to stay with the lender. 
 
There are also a huge number of borrowers that simply remain with the same lender and take out what is called an Existing Borrower deal. Simple, but not necessarily prudent financial planning. 
The thing with the Standard Variable Rate is that it makes lenders money, lots of it! The FCA has implemented the scheme where lenders now must write to exiting borrowers offering a new rate when their current deal ends, some people will take advantage of this, but a huge number won’t or haven’t and will simply roll onto the Standard Variable Rate. The lender, once they send the initial confirmation out that the current deal is coming to an end and offers a new rate, will invariably not send out another notice to customers who don’t switch. Good for the lender's bottom line, bad for the borrower. 
 
There may be good reasons why a borrower decides to stay on the Standard Variable Rate, but in the main it is not a sound financial decision to make, and one that needs to be avoided where possible. 
 
When it comes to deciding on a new rate, either by ticking a box and sending back the form to the lender to switch onto an existing borrower rate; or reviewing the market either on your own, or by engaging the services of a good mortgage broker there are varying benefits to each option. 
 
If you have simply ticked the box of the new rate and sent the form back to the lender you will have saved time and effort, but will have unlikely saved the level of money that you can by looking at re-mortgaging options yourself, or by using a mortgage broker. There are some very good valid reasons for remaining with an existing lender, and should it be the case that you need to stay with your existing lender for whatever reason then that is fine, but ensure that you do opt for a new deal so as not to move onto the Standard Variable Rate. It is always worth exploring your options before making the decision to ‘tick the box’ however as you may be surprised what options may be available to you. 
 
If you decide to take on the task of finding a new mortgage yourself you will likely spend hours speaking to different lenders to ascertain if they will lend to you, being turned away by some and being accepted by others. And, you will only have time to speak to 2-3 at the most before making a decision on which lender to go with. By doing this you may well dismiss a huge number of other lenders that may offer a better rate, service, or terms to the mortgage that could suit your circumstances better. 
 
Lots of mortgage and insurance brokers regularly have clients say that they have spoken to friends/family to get their advice. While your friends and family will undoubtedly be able to give you some advice which may be good, or it may be bad, are they really ‘best’ qualified to give this advice? Ask yourself the same question if you would get the same advice from friends and family, who held no qualifications in domestic electrical wiring, if you were going to be rewiring your house? The likely event in this instance is that you would employ the advice and services of qualified electrician due to the complexities and risk involved in not getting it right. The outcome - you will get a professional service that will put your mind at rest in the knowledge that it was done correctly. When it comes to the biggest financial outgoing that you will have for the majority of your life the principle should be the same. By employing a fully qualified mortgage broker you will get piece of mind and the knowledge that you are in the best possible position with your mortgage. 
If you decide to employ the services of a qualified mortgage broker, you will receive the benefit of them searching the market for the best possible mortgage that fits your circumstances and preferred affordability. It will save you time and effort, as they spend their time doing this for you, not your time, and you will be able to focus on what is important to you during the period that the broker is going into bat for you. It is also highly likely that they will save you a significant amount over the coming years based on the current interest rates available. 
 
One example that I would share is with a client who had never used a broker previously. They were reticent to begin with as they were simply going to remain with their current lender, as they had done for the previous 12 years. They did not see the value in paying my fee at the outset and confirmed that only if I could save them the cost of my fee over the coming years then they would be happy to engage my services. Challenge set. Using the best existing borrower rate on offer by their current lender, I then had to find a better rate in the market with a lender that would accept the client based on their personal situation that was in line with the lenders criteria. I was able to source a broker only deal (a cheaper rate than what the lender was able to offer the general public) and the outcome was to save the client £4500 over the next 5 years! They happily paid my fee, and also received £500 cashback from the lender one month after completion. One very happy customer and one who will never again simply tick the box of the follow-on rate option sent by the lender. 
 
If this client had dealt with a broker at each remortgage point in the previous 12 years they would likely have saved a considerable sum each time and will have either put this money to good use or have been in a position to pay off their mortgage more quickly and saved even more on the reduced amount of interest paid by reducing their overall mortgage term. There are numerous examples of saving clients thousands in mortgage payments when supporting them in re-mortgaging their current deal. If you would like to know what we could save you then please get in touch. 
So, in summary, when you come to remortgage, try to do the following in preparation: 
 
Allow yourself the time to obtain a new mortgage offer. Most mortgage offers are valid for 6 months so I would suggest starting the process 5-6 months prior to your existing mortgage dealing ending. This will ensure that you have an offer in place ready to switch your mortgage and prevent you spending any time on the SVR. 
 
If rates go down during this time most lenders will also allow you to take the new lower rate product and this won’t affect your offer – a good broker will make sure that this happens and keep an eye on rates for you. 
 
Get your finances in order 6 months before your deal comes to an end – clear any credit cards, or debts if possible, reduce your overdraft, DON’T take out any further debt – this will help with your affordability and potentially open the door to more lenders. 
 
Ensure that you are clear on your income and outgoings. If possible, look to increase any overtime available to you, or work as hard as possible to maximise any bonus/commission payments as this could be the difference between obtaining the best rate based on affordability, or just missing out. 
 
Get any paperwork up to scratch – payslips, bank statements, ID etc… this will help simplify the application process. 
 
Look into your credit report – There are various times when a utility provider may have added a default to your report that you were unaware of, it may be that your score has reduced as your debt to credit limit ratio is high and has remained at a high point for some time, it may be that you are not showing on the voters role – The credit report is the lender's eye into your financial situation and how you manage your finances. 
 
Do your research – the best way to do this is to speak to a qualified mortgage broker who will be able to review the market quickly and efficiently using their expertise and knowledge, confirm the best options and also the handle any application/paperwork, deal with the lender on your behalf and manage the whole process through for you. 
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