Ask Annie: 'Is now the right time to make my move to a better mortgage?'


Q: I have an uncompetitive mortgage rate but have put off switching to a better deal as my home is on the market and I am planning to move to a bigger place and will want to increase my borrowings. So my original idea was to change mortgage when I changed my house.

However, I am now thinking I should not wait. I am worried by analysts predicting that UK interest rates are set to rise. If this happened, it would be more expensive for me to move to a new fixed-rate deal.

What advice can you give? In addition, if I were to remortgage now, would I be able to increase my loan in the near future?

AA, Warwickshire

A: Ray Boulger of mortgage broker John Charcol says: "I think you are wrong about rates. While experts were predicting a rise not so long ago, the last meeting of the Bank of England's Monetary Policy Committee left rates where they were at 5.75 per cent, and the question now is not if they will fall but how soon."

As far as fixed deals go, the price of these is determined by the "swap rates" at which banks lend to each other. Mr Boulger points out that two-year swap rates peaked at 6.33 per cent in July and are around 5.7 per cent now, so they have fallen too as the market has reassessed what is happening in the wider economy.

Mr Boulger's view, then, is that there may be no harm in waiting to choose your fixed mortgage when you actually move. However, there is a proviso. Mr Boulger says the housing market is quieter than it has been recently, so it is possible you could have to stay put longer than planned. "It might therefore still be worth remortgaging if you can get a better deal now," he explains.

"Most loans these days are portable and you would be able to take it to your next house as long as you still qualify for it in terms of job status, income level and mortgage loan-to-value."

As for remortgaging now and then increasing your borrowing when you move, this should be possible but Mr Boulger points out that it is essential to check out the terms and conditions of the new loan.

"If you take out a new fixed-rate mortgage, you could simply get another loan from your lender to top up to the amount you need to buy the next property," he says.

But choosing to top up your existing mortgage could mean you end up with different end dates for your different deals – a so-called "staggered finish" – and have to go on to the lender's standard variable rate for part of the loan until the other part catches up, which could prove expensive.

A worse prospect is that you no longer qualify for a top-up loan when the time comes to move – for instance, if the amount you need to borrow for the new property is too high to meet the lender's criteria. Similarly, if your job status has changed, you could be turned down by your lender or end up paying a higher rate for a self-certified loan.

In the worst case of having to start again with a new lender, you might also face early-redemption charges on your first loan.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones