Halifax has effectively withdrawn from the remortgaging market by increasing rates on its discount and fixed rate deals to bring them closer to rates being paid by existing borrowers.
The move follows news that the lender has recently doubled its share of the UK mortgage market to 25%. Although many lenders are currently offering cheaper deals, it seems that Halifax’s money-saving strategy is proving effective and has not cost the lender its competitive edge.
Similar moves have been made by other lenders desperate to stop borrowers moving to the cheapest deal once discount periods expire. Tactics such as trail fees and higher initial rates are becoming more commonplace in the market in a bid to offer customers better long-term deals, so that existing customers no longer subsidise the cheaper short-term rates offered to new borrowers.
Roger Marvin, IFA at Millfield Partnership, said that Halifax’s move comes as no surprise and with more lenders adopting similar strategies, it does not necessarily mean that borrowers will be swayed to do business elsewhere.
‘Lenders are at the moment trying to get a bite of the market share and once they have it, as Halifax does, they increase rates to make up for losses. More borrowers are remortgaging and it is my job to make sure they get the best deal. Although lenders are now offering incentives such as trail fees to prevent remortgaging, this will not deter advisers from seeking the right deal. Halifax is not doing anything that other lenders will not do once they have claimed their own share of the market.’
According to Alison Kellington, senior press officer at Halifax, the lender’s latest re-pricing, which included two-year fixed rates for first time buyers being increased from 6.29% to 6.49% and fixed rates for homemovers rising from 5.55% to 5.89%, forms part of the lender’s long-term plan to ensure new and existing borrowers benefit from the same deals.
‘When we lowered our SVR in February, it was with the intention to narrow the difference in the rates offered to new and existing borrowers. We have re-priced our range again in order to bring them closer together. We are also adapting our products so we can carry on in the direction we set out to go in with the first SVR cut,’ she said.