Understanding how both options work can help you choose the right path.
There are 1.8 million borrowers coming to the end of fixed-rate deals over this year. For many, this will be the first time they’ve had to review their mortgage since securing a historically low rate.
Five-year fixed rates climbed from 4.96% to 5.54% in March alone, according to Moneyfacts. For borrowers coming off 2021 deals, that’s a stark shift from around 2% to well over double that today.
That means many borrowers are likely to see a sharp rise in their monthly repayments, although in most cases this will still be better than doing nothing. If you don’t switch you will move onto your lender’s default product, usually their standard variable rate (SVR), which differs between lenders but currently sit comfortably above 7%.
When your current deal ends, you have two choices if you want to avoid moving onto an SVR:
- switch to a new lender (remortgage)
- stay with your current lender and take a new deal (product transfer).
Both routes can work well, but they suit different borrowers’ situations.
What is a product transfer?
A product transfer is when you move onto a new mortgage deal with your existing lender.
It’s usually the simplest option. You can often log on to your mortgage account, view your product transfer options and choose the one you prefer.
If you don’t need to borrow more (it’s a straight like-for-like transfer), the process should be quick and easy. With NatWest, which won Best Product Transfer Provider at the Your Mortgage Awards, you can get an online personalised quote for a new rate in under 10 minutes.
For a straight switch, there’s no need for a full affordability or credit check as you are already ‘on risk’ with your lender.
This can be particularly helpful if your circumstances have changed since you first took out your mortgage, for example if your income has become more complex, you’ve become self-employed or your outgoings have increased. It’s also useful if you don’t want to fill out forms or you want to secure a new rate quickly.
What is a remortgage?
Remortgaging involves moving your mortgage to a new lender.
This means a full application process, including affordability and credit checks, but gives you access to a wider range of deals.
You can search from all suitable deals instead of just those your existing lender has to offer.
In some cases, this can result in a lower rate or better overall value, particularly if your circumstances have improved since you first took out your mortgage.
Remortgaging can be useful if you have around three months or more until your renewal date and want to look for the most competitive deal for your needs. With NatWest, which also won Best Remortgage Lender at the Your Mortgage Awards, you can select a rate and the lender can hold it for up to 14 days while you consider your options.
When staying put might make sense
A product transfer could be the right choice if:
- You want a quick and straightforward process, with less paperwork and fewer checks
- Your current lender is offering a competitive rate compared to the wider market
- Your circumstances mean passing a new affordability check might be more difficult
- You value certainty and want to avoid delays or the risk of a deal falling through.
For many borrowers, particularly in a market where rates can change quickly, the simplicity of staying with an existing lender can be appealing. You’re dealing with a lender that already knows you, and the process is faster.
When switching lender could be better
Remortgaging might be worth considering if:
- You want to access the full range of deals available, not just those from your current lender
- Your current lender’s offer isn’t competitive when compared with the wider market
- Your financial position has improved since you last applied
- You’re willing to go through a fuller application process to potentially secure better overall value.
Remortgaging takes more time and effort, but it gives you more choice and the chance to compare deals across the market. Even a small difference in rate can add up over time, so it’s worth exploring both options.
Timing matters
Start early: most lenders allow you to secure a new deal around three to six months before your current one ends. This can give you peace of mind and help protect you from any unexpected changes in rates.
If rates improve after you’ve secured a deal, some lenders will allow you to switch to a better option before completion.
Pricing can move quickly and unexpectedly, so having a plan in place can make a real difference.
And if you don’t act before your current deal ends, remember you’ll move onto your lender’s SVR, which is likely to be higher than any of your switching options.
Taking control
Let’s be honest, higher payments may be unavoidable for some borrowers, particularly those coming off older low-rate deals. But there are still choices to be made to minimise the increases.
Understanding your options, comparing deals and acting early can help you manage the move more smoothly.
Speaking to a broker or your lender early means you can explore your options and find the most suitable route, whether that’s sticking or switching.
