It makes me wonder just how far lenders will go before they are making absolutely no money on the mortgage.
It is notable that while headline rates have been tumbling, Standard Variable Rates (SVRs) have not moved and in some cases they have even risen. With fixed rates as low as 1.59% the gap between the promotional rate and the SVR continues to widen with some SVRs at more than 5%. When interest rates or the cost of funds do rise it is also likely to be SVRs that increase first as lenders try to recoup some of the mortgage costs from apathetic borrowers.
This has to be at least one key reason that we need a resurgence in the remortgage market. Much focus has been placed on the Bank of England and when the base rate will rise; even talk of this caused a flurry of remortgage activity back in the summer, but this is only one reason to remortgage. A high reversion rate could dent a borrower’s pocket far more than an interest rate rise.
While many fees are also rising, there is an increasing number of fee-free deals, with free valuation and free legals, so it makes perfect sense for your clients to take advantage of the next low fixed rate.
This is where the broker’s role can be crucial and why it is so important to keep in touch with existing clients. While every new borrower will benefit from the price war and lower prices are something we all welcome, we must stay alert to reversion rates and other higher costs on behalf of the existing clients that we may originally have introduced to much lower rates.
