House Doctor: 'We've been sent a great offer for a switch mortage. What's the catch?'

Click to follow

Question: We've been on Halifax's 3.5 per cent standard variable rate deal (SVR) for months after a three-year fixed mortgage came to an end. But, we've been tempted by "switching" remortgage offers from Barclays (2.18 per cent, plus Bank of England base rate) that look very convincing. Are these just marketing gimmicks to trap us? Ben Cullen, Cambs

Answer: With interest rates so low, it was only a matter of time before lenders began to inject a bit of spice into the UK mortgage market. You have had your head turned by lenders on the hunt for new customers idling on their lenders' SVR.

In particular, Barclays is touting its "Great Escape" home loan lifetime tracker at 2.18 per cent, plus Bank of England base rate – making a 2.68 per cent pay rate.

You'll need 30 per cent equity in your home but the mortgage is free of any fees and lets you jump from its tracker rate to a fixed if the base rate begins to edge up; it also carries no application fee, includes free legal work, valuation and £300 cash back.

Other top remortgage deals include ING's two-year discounted variable at 2.85 per cent – though you'll again need a loan-to-value of 70 per cent to qualify – and Northern Rock's three-year tracker at 2.69 per cent over base rate.

Your interest is understandable. A mortgage index compiled by broker John Charcol shows that borrowers' enquiring about remortgaging leapt 42 per cent in October compared with the previous month. "With some excellent mortgages now available, people are no longer content to sit on their lenders' SVR," spokesman Drew Wotherspoon says.

However, these eye-popping loans rest on a single allure – that theBank of England base rate stays at 0.5 per cent, where it has been since March 2009. Which boils it down to one question, says David Hollingworth at broker London & Country: "Are you happy to take the risk of rates staying low for months, if not years?"

Nobody knows when the base rate will change and, if it rises swiftly, then the Barclays deal could soon turn sour. Unless you're prepared to take the risk, it's worth sticking to your SVR – it's not a bad rate and comfortably affordable.

You can also grab competitive fixes as low as 3.29 per cent with Chelsea Building Society, according to analyst Moneyfacts, as long as you've got 25 per cent equity.

Comments