Santander and Nationwide introduce big change to mortgage rules as borrowers warned to ‘act promptly’
SANTANDER and Nationwide have cut the length of time a borrower can lock in a new fixed-rate before their current deal expires.
It means homeowners coming off fixed mortgage deals will now need to act with more urgency.
The length of time that a borrower has to secure a new fixed deal is decreasing from six months from the end of their current mortgage to four months.
Other major lenders, such as Barclays, Halifax, Lloyds, TSB and NatWest – still give you six months.
This means that anyone with a fixed-rate deal coming to an end soon needs to ‘act promptly’ to secure the best rate.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “This change means that the window of opportunity to secure a new fixed-rate deal at current rates is now shorter.
“Borrowers need to be more proactive and attentive to market conditions to ensure they secure the best possible rates within this reduced time frame.
“It’s advisable for those nearing the end of their current deals or considering a new mortgage to engage with their lenders or seek advice from a mortgage broker promptly.”
Millions of borrowers are facing sharp increases in mortgage bills as their fixed-rate deals come to an end.
The average two-year fixed rate stood at 5.93% at the start of June while the average five-year fixed rate stood at 5.50%, according to MoneyFactsCompare.com.
This contrasts dramatically with typical rates for a two-year fixed deal in December 2021, which once stood at 2.34%.
At the same time, homeowners could bag a five-year fixed rate at just 2.64%.
Mortgage arrears have also ballooned by 44.5% in the first three months of the year, according to new Bank of England data.
This shows the pressure on households as deals come to an end.
WHY HAVE THEY CHANGED THEIR RULES?
The government introduced a new Mortgage Charter in July 2023 to help struggling households.
Lenders who agreed to rules in the Charter were encouraged to raise the amount of time households were given to lock into a new fixed deal to six months.
This was to ensure households had the flexibility to choose a new deal ahead of time and before rates were predicted to shoot up even further.
However, this rule wasn’t compulsory.
Nationwide and Santander say it’s because mortgage rates are now more stable.
WHAT DOES THIS MEAN?
Locking in to a new fix deal six months ahead gives homeowners plenty of time to do their research, find the right deal, and plan a budget.
Nicholas added: “Starting early helps you avoid any last-minute rush and potential gaps in your mortgage coverage.
“It also puts you in the best position to change the mortgage terms should rates reduce between your application and the end of your fixed deal.”
However, if you’re a Nationwide or Santander customer who’s six months away from remortgaging, you’ll now have to wait another two months before you can lock in a deal with your existing provider.
If you’re looking to lock in a new rate six months in advance, you’ll need to get a quote from another lender.
As rates are very similar between lenders, there isn’t a huge imputes to go elsewhere, especially because if you do then you will have to go through the mortgage affordability check again.
Although, anyone who has a deal ending soon should speak to a broker to assess their options.
If your mortgage is due to expire in less than four months, the recent changes won’t make your situation any worse or better and you’ll be able to lock in a new deal from this point on.
WHAT ABOUT OTHER LENDERS?
Each lender has the authority to decide how early a customer coming off a fixed deal can lock in a new price.
Most of the biggest lenders still allow existing customers to lock into a new fixed deal at least six months in advance.
This includes:
- Barclays
- Halifax
- HSBC
- Lloys
- NatWest
- Virgin Money
TSB has only ever allowed existing mortgage holders to lock into a new fix three months ahead of their current deal expiring.
Accord mortgage holders can also only sign up for a new deal three months ahead of time.
Customers with an Aldermore mortgage can lock into a new deal four months ahead of their current fix expiring.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.