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Remortgaging boom: how to get the best mortgage rate when switching

£26bn of mortgages come to the end of their introductory terms in October

More than £26bn worth of mortgages are set to mature in October, heralding a remortgaging boom as buyers seek out cheaper deals.

That's according to data from Yorkshire Building Society, which shows that homeowners could save as much as £200 a month in repayments when switching from a five-year fixed mortgage later this year.

Here, we explain how you could get ahead of the crowd and secure the cheapest deal when remortgaging.

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£26bn remortgaging boom in October

It's already been a big year for remortgaging, with 119,000 borrowers switching their deal in the first five months of the year, according to UK Finance.

In May alone, the number of people refinancing rose by 20% year-on-year.

This trend is set to continue through the Autumn, with Yorkshire Building Society claiming that £26bn worth of loans will come to the end of their introductory periods in October.

And there are big savings on offer to those who move to a better rate.

Yorkshire says that a buyer of a £200,000 property who took out a five-year fix at 85% loan-to-value (LTV) in October 2014 might have paid a rate of 4.25%.

By switching to a new five-year fix now, they could potentially cut their rate to 1.54% - saving more than £200 on monthly repayments.

Is now a good time to switch?

The mortgage market remains very competitive, with dozens of lenders fighting to offer the best rates.

When switching to a new mortgage, the majority of borrowers choose a fixed-rate deal, where the interest you pay is guaranteed for specific period, usually two, three or five years.

In recent years, fixed-rate mortgages have been priced very cheaply, with a low Bank of England base rate bringing down the cost of home loans.

The graph below shows how mortgage rates have changed over the last five years, with two, three and five year rates all dropping by more than 1%.

Should I fix for five years?

The growth in popularity of five-year fixed-rate mortgages has been the big trend of the last 18 months, with many borrowers locking in their rates amid Brexit uncertainty.

Normally, you'd pay more for the peace of mind of a long-term fix. Right now, however, the gap in cost between the average two and five-year deal is just 0.36%, the lowest level recorded in the last five years.

Whether you should fix your mortgage for such a long time depends on your future plans, as many of these deals can come with high early repayment charges (ERCs).

But if you're planning on staying put for the medium term, now may be a good time to secure a great rate.

YearGap in cost between two and five-year fixes

Cheapest deals on fixed-rate mortgages

So far, we've only looked at average rates, but there are much cheaper options available if you're eligible for a chart-topping deal.

Two-year fixes

The amount you'll pay may depend on how large your deposit is - known as the loan-to-value ratio (LTV).

It's possible to get a two-year fixed-term at up to 90% LTV with an introductory rate below 1.8%.

As you can see below, the gaps between different LTVs are now very small, with the cheapest 60% deal just 0.15% cheaper than the best 75% rate.

Competition between lenders remains fierce, with NatWest usurping Halifax at the top of the table after cutting its rates earlier this week.

Max LTVLenderInitial rateRevert rateAPRCFees
90%Yorkshire Building Society1.79%4.99%4.4%£1,495

Five-year fixes

Prices are equally competitive in the five-year market, with introductory rates below 2% available right up to 80% LTV.

If you're tempted by a table-topping deal, it's important to take note of the upfront fees. As you can see below, the cheapest rates often correspond with the highest fees - in this case nearly £1,500.

Some banks offer several versions of the same deal, allowing you to pay a higher initial rate in exchange for a lower upfront fee.

Max LTVLenderInitial rateRevert rateAPRCFees
90%Yorkshire Building Society2.21%4.99%4%£1,495

Should you consider a tracker mortgage?

Tracker mortgages, which follow the Bank of England base rate plus a set margin, tend to increase in popularity at times when the base rate is low.

That's the case right now, with the rate set at just 0.75%.

Unfortunately, however, the benefits of tracking are negligible, with little to choose between the best rates on two-year fixes and two-year trackers, which are shown below.

LTVLenderInitial rateRevert rateAPRCFees

Theoretically, you could make big savings should the base rate fall drop from 0.75% to 0.5%, but in reality this isn't usually the case.

Lenders tend to place a 'collar' on their rates, which limits how low they can drop. Chart-topping deals tend to have collars at their current rate, so even if the base rate falls, your repayments won't.

How soon can I find a new deal?

You don't have to wait until the end of your fixed period to apply for a new mortgage, so it can help to do your research in advance.

Many lenders allow you to lock in a new deal six months ahead of time, but it can take a number of weeks to go through the process, so the earlier you start, the better.

It also makes sense to speak to your current lender and inform them that you're looking to switch at the end of your deal period. There's no guarantee your bank will beat the competition, but it may offer you a better rate to convince you to stay.

If you're a bit overwhelmed by the sheer number of deals available, consider taking advice from a whole-of-market mortgage broker, who will be able to assess the market and find you the right deal.