The remortgage market is on the increase! Customers are taking heed of the low mortgage rates currently available and are reviewing their finances in the run up to Christmas and in preparation for 2011. Many lenders are offering free valuations and free legal costs (using the lenders solicitors) in order to attract new customers. However, the conundrum on whether to take out a fixed rate mortgage continues. With more pundits predicting that the Bank of England Base Rate (BBR) will remain relatively static throughout 2011, one could say a short term mortgage product that tracks the BBR is attractive. At the same time, a fixed rate could be more beneficial over the medium to long term when, it is estimated, the BBR will increase.
So, to cater for both, some lenders have launched a ‘switch and fix’ option, offering the best of both worlds. The products tend to track the BBR over a period of two or three years. Within this period, you have the option to switch to one of their fixed rates (at any time after 3 months) with minimal costs to pay. A clever and innovative way to attract new business! Although, if this is of interest, you need to accept that you will only have the option of the fixed rates available at the time from that lender, and they may be substantially higher at the time of switching, than those on offer today. If only we had a crystal ball…!
The other thing to think about when taking out a new mortgage is the reversion rate of that product (the rate at which the mortgage reverts to, once the incentive fixed, discounted, tracker rate period expires). Some lenders tend to revert to a tracker rate at an amount above BBR. Others revert to their own Standard Variable Rate (SVR), and even in the current climate, they can be high (5.99% +). Always do your homework and make sure you understand all the elements of your mortgage before signing on the dotted line. Ensure that you have no cause for regret later.
No comments:
Post a Comment