One month on from the first of the Bank of England’s emergency cuts to the base rate, the mortgage market looks very different.
Which? research has found that the number of deals available has fallen by nearly 50%, and some lenders are yet to pass the base rate saving on in full to their customers.
With 140,000 mortgages estimated to mature in April, worth a total of £20.9bn, many people will be on the hunt for a new deal.
Here, we explain which banks have cut their rates and why you might find it more difficult to remortgage in the current climate.
Mortgage deals drop after the base rate cut
In March, the Bank of England cut the base rate twice, from 0.75% to 0.25% on 11 March, and then to the historic low of 0.1% on 19 March – an overall drop of 0.65% in eight days.
In the month since the first drop, banks have significantly cut the number of mortgages available to borrowers.
Data from Moneyfacts shows that the number of deals on the market has fallen from 5,239 to 2,750 – a drop of 48%.
There are several contributing factors:
- The government’s introduction of three-month mortgage payment holidays has meant lenders have needed to divert their resources to helping existing customers.
- The dramatic drop in the base rate has resulted in banks withdrawing tracker mortgages.
- The government’s stay-at-home measures mean lenders can’t undertake in-person mortgage valuations, so are shying away from ‘riskier’ loans.
Have banks passed on the base rate change?
The base rate governs the cost of borrowing for banks, so when it drops we would hope to see this passed on to customers in the form of a reduction in the lender’s standard variable rate (SVR).
The SVR is the rate your mortgage moves onto at the end of your fixed term if you don’t switch to another deal.
Banks have generally been proactive. Of the 10 biggest UK lenders, only Coventry Building Society (0.5%) and Yorkshire Building Society (0.5%) have failed to pass on the full 0.65% reduction to customers so far.
The table shows which banks and building societies have cut their SVRs since 11 March.
Which lenders have failed to cut their rates?
The following lenders have so far failed to make cuts to their SVR since 11 March.
Many lenders on this list are smaller building societies that may still be reviewing changes, so although they haven’t reduced their SVRs yet, there’s no guarantee they won’t in the coming weeks.
What does this mean for people remortgaging?
If you’re coming to the end of your fixed term in the next few months, you might be wondering how this affects your remortgaging options, whether you’re changing lender or moving to a new deal with your current bank (known as a product transfer).
What if I can’t switch in time?
Earlier this week, we spoke to a Which? reader who is in the process of switching their mortgage to First Direct. They received an email stating that there could be a delay in processing the switch and that First Direct ‘cannot guarantee any requested completion dates’.
The lender said that, in addition to any staffing issues, it ‘[relies] on other parties to complete your remortgage and they also may experience issues. We cannot be held responsible for any costs or expenses incurred as a result of any delay, as these circumstances are outside of our control.’
Which? approached First Direct with our concerns that this policy could result in borrowers lapsing onto SVRs through no fault of their own.
A spokesperson told us: ‘Our standard successful contact strategy with customers approaching maturity remains in place and the majority of these complete their product switch online.
‘While First Direct is not responsible for the actions of its third-party suppliers, we have an excellent relationship with them and work together to ensure we provide the best possible service to our customers, ensuring any issues are prioritised and resolved appropriately.’
Remortgaging: what the banks say about delays
It’s feasible that many banks could face processing delays and staff shortages, thanks to the impact of coronavirus, so if your mortgage is maturing over the next few months, it’s important to get ahead of the game and switch early.
We asked the UK’s 10 biggest lenders if they could provide assurances that customers wouldn’t be left footing the bill if a remortgage took longer than expected.
In response, most lenders told us that product transfers can be submitted online, but none spoke specifically about customers switching from another lender.
Their responses are summarised below. Barclays failed to respond to our inquiries.
- Lloyds Banking Group (includes Lloyds Bank/Halifax/Bank of Scotland): Currently experiencing a higher volume of calls than usual. Customers can conduct product transfers online or request a callback. Customers looking to switch should get in touch before the month their mortgage matures.
- Royal Bank of Scotland/Natwest: Writes to customers three months before the end of their fixed term. Remortgaging products available over the phone or online. The vast majority of customers renew online.
- Nationwide: Many members choose to switch online. Average phone waiting time for remortgage customers was two to three minutes in March, and phone appointments are available within 24 to 48 hours. Writes to customers well in advance of mortgage maturing.
- Santander: Customers can switch deals online up to four months before their current mortgage matures. If the new interest rate is lower, they’ll be switched immediately without early repayment charges.
- HSBC: Continuing to contact customers with mortgages approaching maturity. Majority of customers complete product transfers online.
- Coventry Building Society: Call volumes are higher than usual but most customers can get same-day advice or an appointment within 48 hours.
- Virgin Money: All customers can still remortgage, regardless of their loan-to-value (LTV) level. Customers can apply for a new deal online. Informs customers four months before maturity and has specialist teams for remortgaging and product transfers.
- Yorkshire Building Society: Only taking applications for remortgages up to 85% LTV, as valuers are unable to visit properties. No lending on new-build homes, flats or properties valued above £1m. Customers can switch 120 days before maturity online or over the phone.
- TSB: Customers can switch three months before their deal expires. If a customer’s switch has been delayed through no fault of their own, TSB will consider backdating the new interest rate.
Will banks relaunch their deals?
The good news for people looking to remortgage is that the best rates have remained largely unchanged in the past few weeks, despite the number of available deals being cut in half.
And more products could soon return to the market, according to Moneyfacts.
Eleanor Williams of Moneyfacts says: ‘We are beginning to see early indications that lenders might be beginning to consider launching new products again, with providers such as Barclays and Halifax via intermediaries taking those first steps. We hope that we may soon see others follow suit.
‘The average SVR is now 4.67% and the average two-year fixed mortgage rate has reduced to 2.21%, so the benefit of switching to a new deal while rates are low is evident for those eligible and would protect these customers from interest rate volatility in the future.’
- Find out more: remortgaging to save thousands in repayments
Which? Money Podcast: coronavirus and mortgages
On last week’s Which? Money Podcast, we discussed mortgage payment holidays, house prices and moving during the coronavirus lockdown.
You can listen to the full discussion below (from 18 minutes).
Which? advice on coronavirus
Our experts have been compiling the advice you need to stay safe, and to make sure you’re not left out of pocket.
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- Can you move home during the coronavirus outbreak?
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- How the coronavirus affects mortgages, savings, credit cards and loans
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