Remortgage In Haste, Repent At Leisure?

Good mortgage deals are not around for long in today's market, but should you make a snap decision over your homeloan?

In the last few years, the mortgage market abounded with competitive products as lenders vied for our business. There were thousands of products available, and lenders had ready access to enormous levels of wholesale funding. And best of all, they wanted to attract as much custom as possible.

This made mortgage rates highly competitive and mortgage lending quite simple and straightforward. When a lender launched a fixed rate product, for example, it usually borrowed a tranche of money at a fixed cost on the money markets. When this ran out, it borrowed some more at a new rate and repriced its product.

How have things changed and why?

The credit crunch and liquidity squeeze cause lenders one big problem -- they can't borrow funds easily or cheaply. So there is not as much money to lend and far fewer products on the mortgage market. Last year there were 15,000 mortgage products available and now there are just 4,000, according to Moneyfacts.

In addition to having less funds, lenders also have a reduced appetite for lending. The focus this year is on quality not quantity as they try to get their mortgage books as clean and low risk as possible.

But this approach has led to surges in demand because the supply of mortgages is so limited. When those lenders who do have decent products experience a flood of applications, their ability to process the deals is hampered and they get accused of poor service. This can force them to pull products simply because they cannot cope with the demand.

How does this affect borrowers?

Aside from poorer service standards, mortgage products are staying on the market for a significantly shorter period than we have been used to.

A year ago, the average mortgage was available for 30 days but this potential window has shrunk by two thirds and now products are only up for grabs for an average of 11 days. In fact at one point in April, following the cut in Base Rate, mortgage deals were flying off the shelves in just six days. This means you have to be quick if you want a good deal.

In normal market conditions it is sensible to try to plan ahead when you are due to remortgage, but if you choose a deal now and you are not ready to renew for another two months, the fact is that it just won't be available.

Three tips for getting a quick deal

1. Quite simply, be ready to make a decision quickly. If you find your ideal mortgage, it won't stick around for long. If it's competitive there'll be others wanting to get their slice of the available funds too. To get yourself ready, do plenty of research around mortgages before you are even looking for a deal.

If you already have a mortgage do this well in advance of your renewal date so you have a good idea of the type of product you are looking for-- fixed, discounted or tracker rate for example -- rather than the actual deal. Then when the time comes and you look at your available options, you will be ready to rule some out immediately and focus on those that meet your needs.

2. Secondly, consider products that do not tie you in with Early Repayment Charges, usually tracker rates. These products can act as a stop-gap - giving you time to reassess the market at a later stage without being tied in for a number of years, as you could be if you opted for a fixed rate. In addition they usually come with lower arrangement fees than fixed rates.

In fact, trackers currently offer some of the most competitive rates on the market at the moment so offer you the best of both worlds - HSBC has a tracker rate at 5.63% with a £999 arrangement fee and First Direct is offering 5.99% with a fee of just £399. A good deal, low fees, and no tie-ins. This type of deal leaves you plenty of options when the market changes.

3. Finally, think about taking independent mortgage advice. If you are going to need to make a decision quickly, talking it over with a mortgage adviser who can look at your circumstances and assess your needs could be invaluable. They may also be able to get your mortgage application through more quickly because of strong relationships with particular lenders.

And if you take out a deal that doesn't tie you in, a mortgage adviser will contact you when the market changes and more competitive mortgage deals are available.

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