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MSE’s Academy of Money
MSE’s Academy of Money

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4.1 Moving to another deal

Around 4 in 10 mortgage transactions relate to people remortgaging their existing property without moving home at the same time. Moving home is very likely to trigger a new mortgage deal as well – certainly when the existing mortgage is not portable from one property to another. But it is the volume of remortgages which highlights the fact that periodically it makes sense to switch to a new mortgage deal, and maybe a new lender too.

The image is a photograph of a young couple completing paperwork (relating to a financial transaction) with an adviser, who is sitting on the other side of the desk.
Figure 5 Let’s sign up to a new deal

One trigger point for remortgaging is when the initial mortgage deal comes to an end. It is normal for the mortgage rate to then default to the lender’s Standard Variable Rate (SVR) unless action is taken by the borrower. And commonly, action should be taken, as SVR mortgages tend to be expensive – certainly when compared with fixed, discount or ‘tracker’ rate mortgages.

All borrowers on SVRs should really review whether they could find something better. A mortgage should not be seen as a product you have to stick with until its term is completed and the money repaid to the lender. Since it represents to many households the largest regular monthly outgoing, every opportunity should be made to switch to a new deal if it makes financial sense. Since interest rates do change over time, opportunities are likely to arise to cut the cost of your mortgage.