Can we switch our mortgage rate before it starts? We think we could now get a cheaper deal

My husband and I are in the process of remortgaging. Our current mortgage ends in August, but we sorted out the new one ahead of time in early June. 

We stuck with the same bank and got an offer for a five-year fixed rate at 4.55 per cent, one of the lowest rates on the market at the time.

However, we can see that now there are five-year fixed rates available as low as 4.2 per cent. Sadly our bank’s rates don’t appear to have changed.

We now have six weeks until the new mortgage starts. Can we still change our mind and move to a lower rate? Is it worth us having a discussion with another lender, or with a mortgage broker to see if it’s worth changing? Or is that risky?

Ed Magnus of This is Money replies: There will be plenty of people either remortgaging or buying at the moment, that will be facing a similar dilemma.

Mortgage rates have been falling in recent weeks, which opens up opportunities for buyers and homeowners to save on their monthly payments.

Last week, for example, Barclays cut its mortgage rates by up to 0.33 percentage points and Halifax, First Direct, Nationwide and Virgin Money also made cuts. 

Many people stick with the same lender when the time comes to remortgage, in what is knowns as a product transfer. 

But often it pays off to move bank or building society, as the one you are with may not offer the best or cheapest mortgage for you. 

> How to remortgage your home 

You told me you have researched today’s rates using This is Money’s mortgage comparison tool, which is a great place to start and will give you a flavour of the best deals.

However, in order to check if you are eligible for a particular deal, the best option would be to speak with a whole-of-market mortgage broker.

Each mortgage lender has its own criteria, which could place limits on the type of properties it will lend on, or the type of person it will lend to.

Not everyone will be eligible for the lowest rate on the market, and a good mortgage broker will understand each lender’s requirements and could help you avoid disappointment.

Some mortgage broker charge customers fees, while others are fee-free and get paid a commission by the lender. 

While there are plenty of other fee-free mortgage brokers, there are many that also charge a separate fee on top.

You can typically expect to pay a fixed fee of between £500 and £1,000, so bear that in mind.

It’s also worth remembering that remortgaging to a new lender will require all the usual affordability and ID checks alongside a mortgage valuation – just like you would have done when you bought the property.

This does add an extra layer of bureaucracy, which often isn’t the case if you choose to stay with the same lender.

The extra effort could well be worth the saving, however, if you can get a cheaper interest rate.

From your initial research, you think you might be able to shave 0.35 percentage points off your existing rate. Depending on the size of your mortgage, that could equate to a solid, if unremarkable, saving.

Moving a £200,000 mortgage from 4.55 per cent to 4.2 per cent on a 25-year mortgage term would be the difference between paying £1,117 a month and £1,078 a month. That’s a £39 monthly saving.

Having looked at our mortgage comparison tool, the lowest five-year fix is currently offered by Coventry Building Society at 4.34 per cent with a £948 fee. 

This is available to anyone remortgaging with at least 40 per cent equity in their home – which you have told me you have. 

It may be that the 4.2 per cent rate you saw is available to home buyers and not people remortgaging.

Mortgage rates being aimed at home buyers are slightly lower than remortgage rates at the moment. 

For example, Barclays is now offering a 4.09 per cent deal with a £899 fee to home buyers with at least a 40 per cent deposit.

For expert advice, we spoke to Elena Todorova, director of mortgage broker SPF Private Clients, and Karen Noye, mortgage expert at Quilter.

Can you switch your mortgage rate before it starts?

Karen Noye replies: Given that your new mortgage hasn’t started yet, you still have the flexibility to cancel the deal and seek a new one. 

Typically, you have up until two weeks before the new rate is set to begin to make any changes without penalty. 

How would they change the mortgage rate?  

Karen Noye replies: You should immediately contact your current lender to discuss your options. Inform them that you have found a better rate and see if they can offer a more competitive one. 

It’s essential to understand the process and any fees for cancelling the current deal if you decide to move to a different lender.

Elena Todorova adds: If you apply for a mortgage deal with a different lender, do not cancel the existing offer immediately. Wait until you are sure that the new offer with the new lender is progressing well. 

Should they use a mortgage broker? 

Elena Todorova replies: If you have a broker, they can take care of your new application, as well as cancelling the existing offer. 

They can assure the case is sent to the lender as soon as possible and that all required documentation is sent on time to avoid delays.

The broker can also check if they have exclusive products which might be better than the terms you can see online. Some remortgage products offer free valuation and legals, for example.

Karen Noye adds: It would be beneficial to consult with a mortgage broker who can provide a broader view of the market, and possibly find better rates or deals that you might not find on your own. 

Mortgage brokers often have access to exclusive deals and can help you navigate the complexities of switching lenders. 

Furthermore, directly checking with other lenders to see what rates and terms they can offer is also a sensible step.

Is switching their mortgage worth the hassle? 

Elena Todorova replies: It’s definitely worth exploring the options with a new lender. 

While we don’t have details of your outstanding mortgage amount or term, the difference on £100,000 on a 25-year term between 4.55 per cent and 4.2 per cent is £20 a month or £1,200 over five years. 

The process of remortgaging with another lender will be different from selecting a rate with your current lender, as the new bank will arrange a valuation and underwrite the case. 

However, current timescales with lenders are quite competitive with an offer typically taking one to three weeks and then a further three to four weeks for legal work to be carried out. 

This should give you just about enough time to be ready for the switch at the end of August. 

Karen Noye adds: While a lower rate is undoubtedly attractive, it’s crucial to consider other factors such as fees, the flexibility of the mortgage, and any early repayment charges. 

Fixed rates are based on future money markets. Even though current rates might be lower, future rates are predicted to decline. 

A short-term tracker mortgage might be more expensive now but could offer more flexibility if rates drop significantly in the future. 

However, locking into a five-year deal provides stability against potential rate increases so you’ll need to bear this all in mind when making your decision about opting for a new deal.

Are there any other costs to be aware of?  

Elena Todorova replies: With regards to legal costs – as this is a remortgage, the lender’s charge has to be satisfied with one lender and registered with a new lender so there is conveyancing and legal work. 

Many lenders offer assistance with legal costs where they cover the majority, if not all, the fees. However, if the property is leasehold and there is a management company, there may be additional charges and it may take time for the management company to reply to the solicitors. 

There could be issues with service with some ‘free’ legal options. You might be able to use your own conveyancer, however, you will be expected to pay their costs.