The Mortgage Clinic: 'How long can we hold out for the best deal?'

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The Independent Online

Our current two-year fixed deal runs out on 5 December but, with many mortgage rates seemingly dropping fast, what's the absolute latest we can apply for a remortgage? We really don't want to miss out on any rate cuts – obviously it's a risk they might rise again, but we're happy to take the chance. J Greenway, Nottingham

Having seen mortgage rates slide in the past few months, and with expectations of further falls, it's no surprise that homeowners facing a remortgage deadline are wondering how long to hold out.

The average two-year fix nudged 7.08 per cent in early July but has since slipped to 6.39 per cent thanks to lower rates from lenders such as Abbey, A&L and HSBC, according to data analyst website, Moneyfacts. "It's now the same average as before the credit crunch last summer," a spokesman said.

On Friday, Nationwide announced cuts of up to 0.3 per cent, while Yorkshire building society reduced its fixes by up to 0.5 per cent; the latter's best two-year fix for an LTV of 90 per cent is now 5.89 per cent, with a £495 fee.

Under the circumstances, it's no surprise that your predicament is shared by other readers, and one landing ever more frequently in Mortgage Clinic's in-tray.

The absolute latest recommended by mortgage specialists is one month before a deadline. "Typically, a remortgage isn't held up by the speed of obtaining an offer but the speed of getting an up-to-date redemption certificate from your lender, and all the legal papers to be signed," says Andrew Montlake of broker Cobalt Capital. "But generally, you can apply for a mortgage up to about a month before."

Richard Morea, of London & Country, however, suggests waiting "no later than six to eight weeks". An awful lot depends on your circumstances, he says: "For example, if you and your partner have been in a steady job for years, it should be a swiftly resolved matter."

But if you're both newly self-employed with few financial records, it'll take a lot longer to find a lender who'll speedily process your application because of your higher perceived risk.

The danger, says Katie Tucker at Mortgage Force, is a stiff penalty if you don't complete before 5 December. "You'd be landed on the lender's standard variable rate, so your payment would likely be a few hundred pounds extra for each month you don't make complete the switch in time," she advises.

One common tactic is to lock in to the most competitive rate, and switch to a cheaper one nearer the time. "However, you run the risk of paying fees upfront with a lender that you then ditch closer to your deadline, and can't then get them back."

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