When Should I Change Mortgage Lender?
Firstly, why should you change your lender? The answer is to take advantage of a better interest rate with a different lender, therefore saving you money each month in the form of a reduced interest payment on your mortgage. But when is the best time to switch?
It can be difficult to predict when the best time to switch lender is, due to the fact that none of us possess a crystal ball, and as we all know, hindsight is twenty-twenty! What we can do though is take an educated guess as to the direction of interest rates, and make a judgement on when and what type of mortgage to swap to.
Currently, the Bank of England have set the base rate at 2%, and there is a lot of speculation that the base rate will fall further. If the base rate does fall to 1% or lower, we will not see a similar reduction in the interest rates currently offered by mortgage lenders, but we should see rates offered to new lenders drop further still.
Comparing rates across different lenders, we can see that rates are still between 4% - 5%, which is a clear 2% - 3% above the Bank of England rate. By taking at look at what the UK LIBOR rate is, we get an insight to why this is. If you look across the spreadsheet you can see that for all different time periods, the rate is dropping. The current rate for 3 month LIBOR has fallen to 2.82% (as at midday 29th December), so we should see lenders starting to offer products that are in the region of 1% above LIBOR.
Keep an eye on the 3 month LIBOR rate, factor in a margin for the banks to add onto this rate and you will get an indication as to what future interest rates will be offered on your mortgage.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment