Can you save with a mortgage product transfer?
For the 1.3 million households needing to remortgage in the next year, many will be wondering whether to stick or twist with their current provider.
You might be tempted to stay with your existing provider when you come to remortgage and do a product transfer to save on the time and paperwork involved in switching to a new lender.
But will loyalty save you money? Here, Which? probes banks on the rates they offer to existing mortgage customers and the current best remortgage rates your bank needs to beat.
Which banks offer existing borrowers a better deal?
We asked nine of the UK's largest mortgage lenders whether they reward existing mortgage customers with better rates.
Barclays, Coventry Building Society, HSBC and Santander told us that they offer exclusive rates to their customers who need a new deal.
Nationwide also confirmed it has an exclusive range – stressing that a two-year fixed rate switcher product at 60% loan-to-value (LTV) is currently 6.09%, whereas the equivalent remortgage product for new customers is 6.39%.
Virgin Money said that its existing borrowers are offered product transfers either 'equal to or lower than our core product rates', while Leeds Building Society told us existing customers are offered tailored options when it comes to securing a new deal.
TSB says that the 'majority of existing customers are offered a lower rate than what a new customer could access', while Skipton Building Society told us new customers won't ever be offered cheaper rates than those who already have a mortgage with them.
Yorkshire Building Society says new customer and existing customer rates are priced independently. They have 'different product features and will be priced at different times'.
Lloyds Bank and Halifax didn't respond to our query, nor did NatWest or Royal Bank of Scotland.
- Find out more: best mortgage lenders.
Cheapest remortgaging rates to beat
Your existing lender could offer you an exclusive rate that trumps those on offer to new customers. For example, the cheapest two-year fix on offer to new remortgaging customers with a 60% LTV is available from First Direct at 6.14%, but Nationwide told Which? existing customers are offered an exclusive rate of 6.09%.
However, you should always compare this with what you can get from another provider, as it could be cheaper. We've detailed the current cheapest remortgaging rates to beat at varying (LTV) amounts.
Two-year fix
| Loan-to-value (LTV) | Lender | Interest rate | Fees |
|---|---|---|---|
| 60% | First Direct | 6.14% | £490 |
| 75% | Yorkshire Building Society | 5.96% | £1,495 |
| 85% | Post Office Money | 6.14% | £1,495 |
| 90% | First Direct | 6.24% | £490 |
Source: Moneyfacts. Remortgaging deals only, correct as of 25 July 2023.
Five-year fix
| Loan-to-value (LTV) | Lender | Interest rate | Fees |
|---|---|---|---|
| 60% | Virgin Money | 5.63% | £995 |
| 75% | Yorkshire Building Society | 5.44% | £1,495 |
| 85% | Post Office Money | 5.59% | £1,495 |
| 90% | First Direct | 5.74% | £490 |
Source: Moneyfacts. Remortgaging deals only, correct as of 25 July 2023.
Products transfers vs switching to a new provider
A product transfer will be less hassle than switching, but you should always check if it will save you money compared with switching to a new provider.
As you're coming to the end of your current mortgage deal, ask your lender what rate it can offer to remortgage, then compare this with what other providers will offer.
You can shop around for deals yourself, but you may find it useful to speak to a whole-of-market mortgage broker, who can survey the options available to you and, in many cases, speak to your current lender on your behalf.
If the rates are very close, you should weigh up the other costs of remortgaging and which deal might save you more money. For example, a product transfer usually involves no valuation or legal fee, whereas switching to a new lender may mean you have to pay for these costs.
- Find out more: what to do if you need to remortgage.
What happens if you don't remortgage?
If you don’t secure a new deal, your lender’s standard variable rate (SVR) will be waiting in the wings, ready to make an even greater dent in your finances.
The average SVR, otherwise known as the revert rate, set by lenders is currently at 7.67%, the highest it's been for 15 years.
The graph shows how average SVRs compare with fixed-rate deals.
The SVR is almost always considerably more expensive than the introductory rate you'll have been paying and the lender can change it at any time.
You’ll automatically be moved on to this if you don't product transfer or remortgage before your deal expires, so finding a new deal beforehand is key.
- Find out more: what to do if you can't pay your mortgage.
