You got your windfall - so why wait around?

Now might be a good time to move your mortgage, writes Dido Sandler

Savers with the Halifax and Alliance & Leicester (A&L) now have no reason windfall-wise to keep their money with the former societies and might well get a better rate by shopping around. But many mortgage borrowers could also save money by switching to a different lender.

The potential beneficiaries are those paying the new banks' standard variable mortgage rates, which have just been increased to 7.95 per cent. Remortgaging would allow these borrowers to take advantage of the gamut of discounted and fixed-rate deals. And by switching to one of the remaining building societies, they could also line themselves up for another potential windfall.

Patrick Bunton, manager at London & Country, a firm of mortgage brokers in Bath, said a borrower with a loan of pounds 70,000, representing less than 70 per cent of the value of a property, would save pounds 1,382 a year for two years, by switching from a Halifax standard variable rate of 7.95 per cent to a two-year discount deal from National Counties building society. National Counties is giving a 1.55 per cent discount for two years off its already competitive standard variable rate of 7.39 per cent, a rate of 5.84 per cent. Furthermore the society will also pay most of a borrower's remortgaging costs.

Mortgage brokers say they have seen a flood of business from Halifax and A&L customers since the free share handouts. Mr Bunton says since the Halifax float this month his company had received two to three times the usual level of remortgages from Halifax borrowers, while in May and the first week of June there was a surge of A&L borrowers. One lender, Abbey National, is even running an advertising campaign aimed at Halifax and A&L borrowers.

Mr Bunton said Halifax only had itself to blame for this flurry of remortgaging, having taken so long to complete its conversion into a bank and in effect keeping thousands of borrowers locked in paying higher rates than they needed to. Ian Darby, the marketing director of John Charcol in London, says strong interest in remortgaging, particularly into favourable fixed- rate deals, is being fuelled by fears of further base rate rises. These, the broker believes, will push lenders' standard mortgage rates up to 8.75 per cent by the end of the year, a further 0.8 per cent from the hike to 7.95 per cent by the Halifax and others.

However, Clive Miers, the chairman of Miers Mortgage & Insurance Services in Shipley, says that remortgaging is not for everyone and people need to do more than compare loan rates in deciding whether remortgaging is worthwhile. It costs on average pounds 750 to transfer a standard variable rate pounds 50,000 loan on a pounds 75,000 property to another lender, he says. These costs include legal fees and valuation fees each costing pounds 175 and the local authority search at pounds 80. The existing lender may charge you a deed production fee and a "sealing" fee to close the existing mortgage, on top of the "headline" redemption costs. In addition to the pounds 750 of switching costs the new lender could charge hundreds of pounds for arranging the new mortgage. The larger the loan the more worthwhile it is to remortgage. Individuals borrowing pounds 30,000 may have little to gain. Larger mortgages gain much more, as many costs are the same.

Mr Miers identifies some borrowers for whom remortgaging is unlikely to be worthwhile:

Individuals with loans of more than 75 per cent of the value of the property who will have to pay a new mortgage indemnity guarantee (MIG) premium. On a pounds 60,000 property the Mig premium on a 95 per cent loan might be pounds 960.

Some borrowers on standard variable rate, who previously enjoyed discounts, will be locked into payments for a given period as a condition of the discount. To exit these lock-in periods borrowers have to pay penalties that can be more than six months' interest repayments.

Borrowers who wish to pay off lump sums or accelerate payments will not be able to do so if they switch from the more flexible standard variable rate to a more restrictive fix or discount.

If you have had any credit problems or arrears with your lender, a new one is unlikely to accept your business.

Mr Miers adds before remortgaging to another lender individuals should check on the deals for existing customers offered by Halifax and A&L. Halifax charges pounds 150 to pounds 200 to move existing customers onto a fixed rate, a considerable saving compared with the costs of remortgaging with another lender. He notes that Halifax is clever in the way it pitches offers so that it makes it less attractive for individuals to move, once they take into account all the costs.

Another way of controlling mortgage costs is to switch to a mortgage lender who is prepared to pay the bulk of the fees. London & Country says National Counties and Stroud & Swindon building societies are among those who offer products that pay borrowers' costs.

q Dido Sandler works for Financial Adviser, a specialist publication.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Supporting role: at the Supreme Court, Rhodes was accompanied by a famous friend, the actor Benedict Cumberbatch
booksPianist James Rhodes on the extraordinary legal battle to stop the injunction of his memoirs
Arts and Entertainment
Jesuthasan Antonythasan as Dheepan
filmDheepan, film review
Sport
Steven Gerrard scores for Liverpool
sport
News
Tattoo enthusiast Cammy Stewart poses for a portrait during the Great British Tattoo Show
In picturesThe Great British Tattoo Show
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?