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.

PROMOTED VIDEO
News
Teeth should be brushed twice a day to prevent tooth decay
education
News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
Sport
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
News
Those who were encouraged to walk in a happy manner remembered less negative words
science
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
News
Renee Zellweger as Bridget Jones
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
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

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London