People who switch mortgage lenders to get lower rates are called "Rate Tarts" by those who offer mortgages. The author comes up with a much better name for them: Shrewd Shoppers! Who would pay more for the same thing, in this case money, when it can be bought elsewhere for less? In the end, a GBP from one lender is just as good as a GBP from another.
The mortgage market is very competitive, and as long as lenders use price as their main marketing tool, remortgagers will follow deals that are cheaper because of price competition. You can call them Rate Tarts if you want, but they will be better off because of it.
To stop people from switching mortgages, some lenders have raised their up-front fees and others have made their programmes to keep customers. In a market with so much competition, the best customer retention programmes will get praise, but raising up-front fees will only hurt the lender's market share, even if it means making more money. It looks like lenders still don't know that rewards are better than punishments.
For example, Birmingham Midshires has a fixed deal with a rate of 3.89 percent for two years. This seems like a great deal until you read the fine print and see that the arrangement fee is not the average of GBP500, but a huge GBP1,499! If the fee is written off over two years at a rate of GBP749.50 per year, it's the same as adding 0.75% more interest to a GBP100,000 mortgage.
So, if you're thinking about remortgaging, you should do two things. First, add up everything it will cost to move your mortgage. Remember to include the valuation fee (usually GBP250 on a GBP100,000 mortgage), the arrangement fee (usually GBP500), maybe a booking fee (GBP50), legal fees to switch the mortgage (usually around GBP350 on a GBP100,000 mortgage), and any penalties you'll be charged to get out of your current mortgage.
Now you need to call your current lender.
Tell them you're looking for a better deal on your mortgage and might move it. Lenders often believe that if they offer a good deal, customers won't care unless they're pushed. They count on the fact that many borrowers will be happy to wait and avoid the cost, time, and trouble of remortgaging. So shake their tree and see if a better deal falls out. If they just give you their standard variable rate, you shouldn't do business with them.
Once you've figured out all of the costs of moving, found the best new deal you're eligible for, and asked your current lender how much it would cost to keep your business, you can compare the options and make a clear decision.
Brokers Online is one of the biggest finance websites in the UK. They offer quotes for life insurance and most UK financial services, like remortgages. More info - How do I know if I should switch mortgages?
