Switching your mortgage mid-deal; The Pros and Cons

In the dynamic landscape of mortgages, the question of whether to switch your mortgage mid-deal can cause much thought and deliberation, especially if you are fixed on a higher interest rate than may be available.

With fluctuating interest rates and changing personal circumstances, it’s natural to consider the possibility of seeking better terms or more suitable arrangements. Equally, your circumstances may change, and you may require additional funding for home improvements or debt consolidation.

With the base rate having risen 14 times in succession from late 2022 to the end of 2023, mortgage rates rose significantly. Mortgagees that exited extremely low fixed rates rate over that period, suddenly found they were faced with huge hikes in interest rates and mortgage payments.

It is anticipated, that during 2024 and the following couple of years, the base rate will start to reduce and mortgage rates will follow. It therefore stands to reason that, as rates drop potential savings could be made by switching your mortgage deal. Sussed our free mortgage app can help you monitor if savings can be made, the App can be downloaded using the link at the bottom of the page.

Switching deals though needs careful consideration and advice, as switching can come with both advantages and drawbacks.

The Pros:

  • Potential savings: Generally, the primary motivator behind switching your mortgage mid-deal is the prospect of potentially saving money. If interest rates have decreased since you took out your mortgage, securing a new deal with a lower rate could lead to significant savings over the remaining term of your loan.
  • Improved terms: Beyond just interest rates, switching your mortgage mid-deal can also provide an opportunity to access more favourable terms and conditions. This could include features such as flexible repayment options, offset facilities, or the ability to make overpayments without incurring penalties.
  • Tailored to your needs: As your financial situation changes your mortgage requirements may also require a review. Switching mid-deal may allow you to align your mortgage product more closely with your current needs, whether that involves extending the term, changing from a fixed or variable rate or vice versa.
  • Consolidating debt: For homeowners with additional financial commitments, such as personal loans, credit card balances or HP agreements, switching your mortgage deal can offer the chance to consolidate these debts into a single, more manageable payment. This could assist with streamlining your finances and potentially reducing your monthly payments.

The Cons:

  • Early repayment charges: One of the most significant drawbacks to switching your mortgage mid-deal is the potential incurring early repayment charges (ERCs). Many mortgage agreements impose penalties if you repay or switch your mortgage before specified., Typically during the initial fixed or discounted period.
  • Fees and charges: In addition to ERCs, there may be various other fees associated with switching your mortgage mid-deal. These can include arrangement fees, valuation fees, legal fees, and administrative costs. It is essential to factor these expenses in when comparing the financial benefits of switching.
  • Potential impact on credit score: Applying for a new mortgage involves a credit check, which can temporarily impact your credit score. Multiple credit applications within a short period may raise concerns among lenders and could potentially affect your ability to secure credit in the future.
  • Market volatility: Whilst the prospect of securing a lower interest rate is appealing, it is important to consider the broader economic context. Interest rates are subject to market fluctuations, and there’s no guarantee that they will remain low or decrease further in the future. Attempting to time the market carries inherent risks.

Deciding whether to switch your mortgage mid-deal is a significant financial decision that requires careful evaluation of the potential benefits and drawbacks. Whilst the opportunity to save money and improve your mortgage terms can be appealing, it is essential to weigh up these advantages against factors such as ERCs, fees, and the potential impact on your credit score. Ultimately seeking professional advice and conducting thorough research is important to ensure that you make an informed choice that aligns with your long-term financial goals.

As a mortgage broker, MMPE has invested in technology to assist our clients to monitor where savings can be made.

Our revolutionary new mortgage app Sussed, constantly scans the market reviewing new mortgage products. The app will store your current mortgage scheme details, and the valuation of your property (which is updated monthly), the app equally considers any early repayment charges associated with your current mortgage. If potential savings can be made Sussed will notify you, so that you can review and discuss with your broker.

Download sussed here IOS / Andriod

If you would like further information or to discuss options, contact one of our Independent Mortgage Advisor.

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My Mortgage Experts & Protection Experts Ltd (FCA 937076), is an Appointed Representative of King Mortgages Ltd.

King Mortgages is authorised & regulated by the Financial Conduct Authority (FCA). King Mortgages Ltd is entered on the financial services register http://register.fca.org.uk/ under reference number 803561.

The information contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

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      Automatic Property Value Updates

      Changes in property value, coupled with a potential reduction in your loan amount (with a repayment mortgage), mean a change in the equity available in your property (Loan to Value); hence there could be improved opportunities for a better mortgage for you.

      Product Expiry Date

      Sussed will track when your mortgage is due to expire (usually when your mortgage payments rise substantially as you will automatically transfer to your lender’s standard rate).

      The app will alert you when it’s the right time to discuss your options with your mortgage broker.

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      This feature is ideal for today’s economy and increasing prices. Sussed will continually scan the market, looking for the best-fixed rates available, especially when interest rates are rising.

      Using a series of algorithms, our clever technology can identify longer-term fixed rates available today that could save money against predicted rates at the end of your current product term (including the cost of transfer) – sussed is doing all the hard work.

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      With automatic property value updates and your Mortgage information loaded, this feature calculates the amount of equity and the maximum potential loan that may be available within a landlord’s portfolio. This will assist with seeing if there is the opportunity for to perhaps buy another property from leveraging your portfolio.

      Within sussed, you will also be able to see each of your properties with a roadside picture, a confirmed property value, monthly rental, current mortgage balance, payments, interest rate and the Loan to value/Gross rental yield.

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      Early Review

      This feature is there waiting for interest rates when they reduce. Using the same technology as Rate Riser, sussed will identify if your current deal is now able to be improved.

      Should the interest rates decrease, sussed will compare deals available on the day with your existing deal and flag if there is an opportunity for you to save money by switching.

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