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16 Mar 2019

Will your bank offer you the best rate when remortgaging?

Discover which lenders reward loyalty with better mortgage rates

Shopping around for a utility company or mobile phone provider can save you a pretty penny, but does loyalty pay when it comes to finding a new mortgage deal?

If you're looking to remortgage, you might be tempted to stay with your current provider. After all, your bank already has access to your financial information, and it saves you the hassle of going through the application process with another lender.

For some homeowners, however, a show of loyalty can be costly, as banks don't always reciprocate with better rates.

Here, we assess your options when you come to remortgage, and offer advice on how to find the best deal.

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What is a product transfer?

When you remortgage with your current provider, this is known as a product transfer.

Data from UK Finance shows that nearly 1.2 million homeowners chose a product transfer in 2018, more than double the number who remortgaged with a different provider.

This can perhaps be put down to lenders proactively contacting borrowers as they come towards the end of their fixed-rate deal.

Product transfers aren't the right move for everyone, however.

If you're looking to significantly alter the terms of your loan - perhaps to increase your borrowing or pay off a Help to Buy equity loan- you'll need to go through the formal remortgaging process instead.

Can existing borrowers get a better deal?

The mortgage market is highly competitive, with more than 50 lenders offering residential loans. This means the odds of your current lender offering the best rate are low, although some lenders may reward their longstanding customers.

David Blake of Which? Mortgage Advisers says: 'In terms of loyalty, it very much depends on the lender. Some banks will offer existing customers the same or even slightly better rates than new customers, while for others the reverse will be true.'

We asked the 10 largest mortgage lenders in the UK if they offer better rates to existing customers, and - as you might expect - most remained tight-lipped about their retention strategies and offers. A handful, however, were more forthcoming:

  • TSB said that it offers specific fee-free products for existing borrowers, and regularly reviews its rates to ensure they're 'competitive, if not better' than rates for new customers.
  • Yorkshire Building Society said that its rates for existing borrowers can sometimes be lower than those for new customers - although direct comparisons would be impossible because of different fee structures and incentives such as cashback.
  • HSBC and Coventry Building Society both said that they offer the same rates to new and existing customers.

Cheapest remortgage rates

When we looked at the cheapest initial rates on two and five-year fixed-rate remortgaging deals, we found that in almost all cases the lowest rates were available to both new and existing customers of the lender in question.

There were two notable exceptions, however. In the two-year fixed-rate market, at both 80% and 90% loan-to-value ratios, rates offered by Accord were not only better for existing customers than new customers, but they were market-leading overall.

The tables below show the best rates in the market for each loan-to-value ratio.

Two-year fixed-rate deals

Max loan-to-valueLenderInitial rateRevert rateAPRCFees
60%Lloyds Bank1.43%4.24%3.7%£999
75%Yorkshire BS1.47%4.25%4.2%£1,495
80%Accord (existing customers)1.63%4.99%4.3%£1,495
90%Accord (existing customers)1.75%4.99%4.3%£1,495

Source: Moneyfacts. 12 March. APRC represents the annualised interest over the life of the loan. Loan-to-value represents the loan as a percentage of the home's value.

Five-year fixed-rate deals

Max LTVLenderInitial rateRevert rateAPRCFees
80%Yorkshire Building Society2.01%4.99%4.1%£1,995

Source: Moneyfacts. 12 March. APRC represents the annualised interest over the life of the loan. Loan-to-value represents the loan as a percentage of the home's value.Links in the above table take you to the relevant deal page on Which? Money Compare.

Should you use a broker when remortgaging?

When searching for a mortgage, you can try to find your own deal by shopping around different lenders.

Alternatively, you may opt 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.

Indeed, data from UK Finance shows that around about half of product transfers in 2018 were done through an adviser.

David Blake says: 'You should always survey the whole market when comparing your mortgage options.

'Most lenders allow brokers to submit product transfers, so they should be able to advise you on the best course of action, taking into account what your existing lender will offer you.