Cheap remortgage rates not always good value, claims loveMONEY.com

5th December 2016

According to new research from loveMONEY.com, homeowners are spending an average of £5,000 chasing cheap remortgage deals.

The finance website claims some lenders have been maximising profits by offering mortgage deals with a low rate but offsetting with hefty arrangement fees.

While the site recognises that there can be value in chasing low mortgage and remortgage rates, it’s important that borrowers compare deals based on the total costs rather than simply opting for the lowest headline rate. This is particularly relevant for those borrowing small sums or for buyers living in lower house price areas, as fees account for a larger proportion of the overall costs.

Figures show that the typical mortgage term is 25 years, although this is gradually increasing. Research from loveMONEY.com found that the average UK homeowner is likely to remortgage every five years; roughly five times over the duration of the mortgage term.

According to Which? figures, remortgaging fees can vary from between zero and £2,000, but the majority can expect to fork out around £1,000 in arrangement fees and as much as £500 more for legal and exit fees. By paying out approximately £1,000 each time homeowners remortgage, fees can add £5,000 to their existing mortgage and interest payments.

John Charcol’s Raymond Boulger says: “The basic rule is that the smaller the mortgage and the shorter the term of the initial deal the bigger the impact the various costs have on overall value.

“Therefore, based purely on rate and fee those with a small mortgage are likely to be better off choosing a longer-term deal.”

He adds: “Locking in to a longer0term rate and hence avoiding the need to remortgage every two years also avoids the risk that a change in personal circumstances or lenders’ criteria makes it impossible to remortgage, as well as reducing costs.

“If fear of incurring an early repayment charge (ERC) worries anyone otherwise tempted to take a longer-term fixed rate there are some good fixed rates with no ERC.”


*2 year fixed with TSB 1.09% then 3.59% - APRC is 3.3% Max LTV is 60%. Quoted on 27th May 2020.