Last-time buyers - those nearing the end of their mortgage term - are sometimes ignored by the mortgage market. But a new mortgage has been designed specifically for them.
When borrowers get towards the end of their mortgage term, they are less likely to worry about switching from one deal to another, or constantly chasing their tails for the best rate.
After all, in the final few years of a repayment mortgage term, your balance is pretty low and the interest rate you pay is less of an issue than it is for borrowers with a chunky £250,000 mortgage for example.
Plus, you have remortgaged enough times in the past to know that it takes time and effort, no matter what the lenders say. And you are probably well aware that rising arrangement fees have made it a much more expensive process to switch.
Perhaps you have decided that the savings to be made on your interest rate just aren’t worth the hassle, time and cost of switching.
You may not know it, but lenders have a name for you – the last-time buyers. You are not going to buy again (unless you downsize when you are older), and you are unlikely to bother switching your mortgage rate.
However, one lender is specifically targeting you with a new mortgage designed for borrowers with just a few years left to run on their homeloan.
The Rollover Remortgage
Yorkshire Building Society has developed the ‘Rollover Remortgage’ specifically for borrowers with a short term left, a low outstanding balance and little motivation to switch their homeloan.
It reckons that many borrowers in this category are paying their lender’s standard variable rate (SVR) and owe less than 40% of the value of their property – in some cases much less.
This makes them attractive customers to snare, as they are very low risk and have a large equity buffer to protect the lender against falling house prices.
According to Yorkshire Building Society, the majority of these borrowers with low balances and shorter terms are paying more than they need to by sitting on SVR, but may be deterred from switching lender because they do not want to pay large remortgage fees or do not think switching will make much difference to their monthly payment.
That’s where the Rollover Remortgage comes in.
It is a one-year fixed rate of 2.99%, with a low, one-off fee of £495. And it is available exclusively to borrowers who owe less than 35% of their property’s value.
The clever bit comes at the end of the year, when you can choose to rollover to another one-year fixed rate, without any product fee. The lender will announce the rate for the next year at least a month before the end of the current deal.
So every year borrowers can decide whether to rollover onto the new one-year fixed rate, move to another product with the lender, revert to the lender’s standard variable rate (which is currently 4.99%) or remortgage elsewhere.
Protect and save
The Rollover mortgage takes a four-pronged approach to attracting last-time buyers.
[SPOTLIGHT]Firstly, at 2.99% it is priced significantly lower than the average SVR – which is 4.82% according to Moneyfacts – so it will offer a monthly saving to those who are currently sitting on SVR. This could be as much as £30 a month, or £360 a year. Even if you only have five years to go on your mortgage, that amounts to a significant potential saving of over £1,500.
In fact, it is priced lower than the vast majority of new mortgage deals too, so borrowers will find it hard to beat, especially when you take into account the low arrangement fee.
Secondly, because it’s a fixed rate borrowers are protected from interest rate rises for the fixed rate duration. Some lenders have already increased their standard variable rates this year and others could follow.
Thirdly, it is a product that doesn’t require a long-term commitment, something that borrowers at the end of their mortgage term may be wary of making, especially with interest rates expected to stay low. They have an annual opportunity to escape if they decide the Rollover rate isn’t right for them – and if you choose to move to another Yorkshire mortgage or its SVR there will be no arrangement fee payable.
And finally the deal comes with free legal and valuation fees, meaning there is a minimal upfront cost to the mortgage – just the modest £495 fee. This isn’t an expensive switch to make. The Rollover mortgage also comes with 12 months’ free home insurance.
Any drawbacks?
Of course, the fixed rate is only set for one year, at which point the society will reset it, and borrowers then choose whether to rollover onto the new rate or remortgage elsewhere.
If the lender sets next year’s rate significantly higher you may decide you don’t want to rollover onto it. That gives you a choice of other Yorkshire Building Society products (which may not be as attractive), its SVR (which is significantly higher) or you could check out the wider market, and pay the applicable fees.
So while you are only committed for a year, the Rollover Remortgage will really only work out a great deal if the rate remains low for the coming years. If not, it’s essentially a one-year fix, which many last-time buyers won’t want because it means an arrangement fee now and potentially another in a year’s time if you decide to move to another lender.
It all hangs on the Rollover Rate, and you will only find that out towards of the end of each year.
Alternative options
You could look at other options, including other new mortgage deals with modest arrangement fees. After all, interest rates are expected to remain low for the foreseeable future, so a cheap tracker deal could well allow you to benefit from a low pay rate for the next few years. HSBC has a term tracker also priced at 2.99%, for example, which is fee-free.
Remember the Rollover Remortgage also comes with free legal and valuation fees which will save you a few hundred pounds on your upfront costs, so that should be factored into any comparison. And there are some good options about. Below are some of the best:
10 low-fee remortgage deals
|
Lender |
Term |
Rate |
Fee |
Max LTV |
|
2-year discount |
2.49% |
£499 |
60% |
|
|
2-year fixed |
3.09% |
£299 |
60% |
|
|
2-year tracker |
3.29% |
£295 |
75% |
|
|
Term tracker |
2.99% |
Fee-free |
60% |
|
|
Term tracker |
3.59% |
Fee-free |
65% |
|
|
Term tracker |
3.29% |
£499 |
65% |
|
|
2-year fix |
3.49% |
Fee-free |
65% |
|
|
2-year fix |
3.49% |
Fee-free |
60% |
|
|
2-year fix |
3.59% |
Fee-free |
70% |
|
|
5-year fixed |
3.84% |
£299 |
60% |
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This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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