Natwest makes big change to mortgages following Nationwide, Barclays and Halifax
NATWEST has confirmed it will be making a huge change to mortgages for all of its fixed-rate customers.
The decision follows similar moves this year by Barclays, Halifax, Lloyds Bank, Nationwide and Santander.
The high-street bank has cut the length of time a borrower can lock in a new fixed-rate before their current deal expires.
This period has now been reduced from six months to four months.
The length of time that a borrower has to secure a new fixed deal is decreasing from six months from the end of their current mortgage to four months.
A fixed-rate mortgage means your monthly payments will stay the same for the length of the agreed term.
The change is already in effect, with customers being sent a reminders to select a new product.
A spokesperson for NatWest said: “We’re seeing our customers choosing to lock in new rates much closer to the end of their current term.
“To align with this, and like others in the market, we have moved to a four month window for choosing a new product.”
By choosing a new fixed-rate deal before your current one ends, you can rest assured your deal won’t change if interest rates rise later on.
It’s good to get in early, as if you find a new rate you prefer by the time your deal is over, there’s no penalty for changing your mind.
But it is also now more important than ever to be prepared, as Natwest comes is sixth bank to slash the product transfer period.
If you are also with Halifax, Lloyds, Nationwide or Santander, you now have just four months to lock in a new rate.
If you’re with Barclays you have even less time – just three months.
You still have a full six months, however, if you are a customer with Virgin Money or HSBC.
In recent weeks, major lenders have been hiking a selection of mortgage rates, citing the swap rate environment.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
Swap rates are based on what the markets think interest rates will be in the future
The Bank of England recently reduced the base interest rate to 4.75%, a quarter-point cut, marking the second time interest rates have been cut this year.
The average two-year fixed mortgage rate today is 5.53%, down from 5.54% the previous working day, according to Moneyfacts.
Meanwhile, the average five-year fixed residential mortgage rate today is 5.28%. This is unchanged from the previous working day.
But there are signs that things are looking up, as Barclays said it will reduce rates on selected products by up to 0.20 percentage points across its residential purchase and remortgage range.
Finance experts are expecting rates to reduce more gradually than previously expected amid the wider economic environment.
Nicholas Mendes, mortgage technical manager at broker John Charcol said: “Barclays has made a bold move as the first high street lender to cut mortgage rates in response to recent market changes. With swap rates easing over the past couple of days, it’s great to see a lender acting quickly to reflect the slightly improving conditions.
“Some standout reductions include the two-year fixed at 90% loan-to-value (LTV) with no product fee, dropping from 5.49% to 5.39%.”
What does it mean for customers?
Locking in to a new fix deal six months ahead gives homeowners plenty of time to do their research, find the right deal, and plan a budget.
If you’re looking to lock in a new rate six months in advance, you’ll need to get a quote from another lender.
Although, anyone who has a deal ending soon should speak to a broker to assess their options.
If your mortgage is due to expire in less than four months, the recent changes won’t make your situation any worse or better and you’ll be able to lock in a new deal from this point on.
Either way, borrowers can still check if they can still ditch their deal penalty-free and switch to another provider in case interest rates drop.
In effect, sticking with the same lender becomes an insurance policy for the borrower, as long as they can get out of it.
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