Remortgaging: 6 Month Rule

Remortgaging is the process of moving from one mortgage lender to another, usually at the end of the product term. Once a fixed rate product term comes to an end, the interest rate typically changes to the standard variable rate (SVR) of your mortgage lender. SVR is often more expensive and is subject to change, therefore providing no security in monthly payments. Remortgaging allows a new rate to be secured, ready for when the current product term comes to an end and preventing you moving onto SVR.

Throughout 2022, mortgage rates have steadily risen. Rates spiked in September following the mini-budget and the subsequent reversal of the majority of mini-budget measures has seen rates steadily fall. However, with mortgage rates still higher than they have been for several years, many homeowners remortgaging in 2023 will be facing higher interest rates and higher monthly payments. While this is the simple reality, there are ways for homeowners to adjust their mortgage to ensure they remain affordable when they come to remortgage. Whether it be considering variable rate mortgages such as trackers or discount rates, offset mortgages, interest-only mortgages and, if necessary, extending the mortgage term.

When it comes to remortgaging, the six months rule relates to arranging your remortgage six months before the end of your current product term. The reason this is set at six months is because the majority of mortgage offers are valid for six months. Mortgage rates are secured at the point of application. Providing the application progresses to mortgage offer, borrowers then have six months before they need to complete on the remortgage, giving time to reach the end of their current product term on their existing mortgage.

In a market where mortgage rates are rising, this is particularly important. Being proactive and getting your remortgage sorted early can save thousands across the product term. In a market where mortgage rates are falling, there is less urgency. However, it is still recommended to start the remortgage process six months before the end of your product term. If mortgage rates fall before you complete on the remortgage, your broker should either switch you to the better rate with the prospective lender or consider a subsequent application to another lender.

A product transfer/rate switch is the same concept as a remortgage but involves securing a new product with your existing mortgage lender, as opposed to remortgaging to a new lender. A product transfer is typically a simpler process as your existing lender doesn’t need to reassess your circumstances. However, with mortgage rates increased and homeowners already facing increased monthly payments, ensuring you’re getting the cheapest, most appropriate mortgage has never been more important.

Across the mortgage market, there are over 100 different lenders. These include high street names, regional building societies, challenger banks and specialist lenders. Limiting your options to the products offered by your existing lender will likely leave you paying a higher rate of interest and higher monthly payments than necessary. If you’re looking to remortgage in 2023, you want to discuss interest rates and monthly payments, or have any other mortgage or life insurance queries, we’re here to help with free, professional advice.