As a property journalist with an inbox crammed full of doom-filled missives about the housing market and interest rates, I thought I had my eyes wide open when it came to my own mortgage.
My five-year fixed rate was coming to an end and the abrupt jump out of 2018 and into 2023 was going to be painful. But I’d call a few contacts, do a few sums and get back to observing the madness from afar — or so I thought. Reality has been messier.
But as well as encouraging me to remember my many advantages, including owning a house in the first place, remortgaging has taught me some valuable lessons…
1. Beware: the chaos is real
It's easy to become desensitised to headlines, especially when they form part of your daily working grind. But, really, it's madness out there.
When I logged on to the NatWest portal to secure a rate switch — a free, no-commitment alternative to landing on the scarily high standard variable rate (SVR) when your current deal expires — all the percentages looked a lot higher than I’d been advised they would. They’d been revised just hours after I’d spoken to my broker.
No matter, I thought, this is only the backstop. I've got the whole market to play with. Except, of course, that every time I thought I'd found a better alternative, it was withdrawn.
Luckily, I had a broker doing the graft for me. One Friday afternoon, she was placed at number 1,866 in an HSBC queue to secure a rapidly disappearing rate.
Adrian Anderson, director at mortgage broker Anderson Harris, says a scramble for ever-evaporating fixed deals caused "panic" among borrowers.
"With rates pulled at such short notice, my colleagues and I have been submitting applications until 11pm and over the weekend. It is a mentally challenging time as an advisor as it feels like we are constantly delivering disappointing news."
2. Brace: this is going to hurt
Doesn't 2018 seem like another age? We were pre-Covid, part of the EU and you could get a 1.89 per cent fixed rate on your mortgage. I know because I did, to buy a three-bed semi just inside the Hertfordshire arc of the M25.
Fast forward five years and the rate switch we were eventually offered by NatWest would see our monthly payments soar by £470.
Leaving macroeconomics aside, a lot can change on a personal level in the space of a fixed term. We’ve had a second child and my girlfriend has reduced her working hours substantially due to chronic illness.
While we have many reasons to consider ourselves fortunate, I can’t imagine the impact on those who stretched themselves to the limit to buy five years ago or have seen their disposable income dramatially reduce in that time.
Shahram Shaida, co-founder of homebuying platform Allbricks, says his own mortgage payments have doubled since late 2022.
“I really feel for Brits who are looking to remortgage this year," he says. "Many fear losing their homes, with many forced to look at trying to get a second or third job. Homeowners feel like they’re being punished for something they haven't done."
3. Use your time wisely
No-one rejoices at the prospect a £470 hike in monthly payments, and it’s not like we’re getting more house for that investment, or paying off the debt any quicker. But we snapped up the NatWest rate switch on the first day it was available, six months before the end of our current deal.
The rationale is that we are insulated against future Bank of England hikes and market shifts, having secured a ceiling rate for our next deal.
However it won’t kick in until our present mortgage actually ends in December so if anything better becomes available in that time, whether at this lender or elsewhere, we can cancel and hop across. Note to self: cancelling unwanted mortgages is actually quite important. Don’t let this be like that lockdown Amazon Prime subscription.
Having set a ceiling, we then went about trying to lower it, looking across the rapidly shifting marketplace to find better options. What is critical here is understanding the time markers to ensure anything you agree to would not kick in before or after your current fixed-term concludes, leaving you exposed to exit fees or the dreaded SVR.
Anderson says the days of leaving remortgaging to the last minute are over for now.
“We have been contacting our existing clients nine months before their rate expires just so we can make sure we have all our ducks in a row to submit an application as early as possible,” he explains.
4. Read the small print
When is two years not two years? When it's a fixed-rate mortgage.
Apparently I’m not alone in failing to realise that the titles given to these deals are almost random. It was only when glancing through paperwork for one product that I realised it would revert to SVR within 21 months.
Often mortgage terms will have a fixed end date regardless of when you actually take them up, while others last for a set number of payments that is almost never in line with the headline number of years. The upshot is that two different banks could offer you separate so-called three-year deals that end several months apart.
That difference could be huge in the current climate and significantly affect the payments you are faced with further down the line. More immediately, it could also leave you sleepwalking into higher rates tomorrow under the misapprehension that your current cosy arrangement lasts longer than it actually does.
Choosing how long to fix for is largely about appetite to risk. Products are priced to reflect general sentiment so if you want to bet that rates will rise for longer or fall more slowly than expected, strap yourself in for an extended period. And vice-versa. But do try to be sure that you understand the true length of the agreement.
David Hannah, chairman of property tax consultancy Cornerstone Group International, says the end-of-term window can have a particularly "huge" impact on those approaching retirement age, who could be hit with unexpectedly high repayments just when their income disappears.
"It can often be the decider of which side of the poverty line Britain’s ageing population lives on," he says "There are two million pensioners currently living in poverty. Given the long-term implications that most mortgage deals currently bear for borrowers, a significant level of due diligence is needed.”
5. Consider the big picture
It is easy to judge a deal on its headline interest rate. Of course this has a substantial impact — for us every quarter of a per cent rise meant finding an extra £30 every month, or £720 over two years.
But there are many other variables that could outweigh these figures. Consider how long you’ll be paying the mortgage in its entirety, any upfront fees and early repayment costs.
We hedged our bets, securing a deal from Coventry Building Society that raises all the flags above, but our eyes are open and we’ve done the maths. It would stretch our term by a few years and also includes a folded-in fee, both of which mean paying more in the long run.
We must now consider the merits of the Coventry deal versus the NatWest switch. The latter means higher payments during the pinch period of the next two years. If we take the former, the hope is that the situation eases so we can pull back the term and pay down the debt. If you still see my byline in the 2050s, you will know that didn’t work.
Ultimately many of the decisions are personal and situation-specific while different lenders also have their own processes and requirements, some of which may suit you better than others.
"If you are searching for a new mortgage how long will the offer letter be valid for? And is that from date of application or date of offer?" asks Anderson. “Do you intend to overpay into the mortgage? How long do you intend to reside in the property? What type of property do you live in and does it fit the criteria of the bank lending policy?
"There are many factors to consider. Speak with an independent mortgage broker who is aware of these variables and can help guide you through."
