Standard Variable Rate Mortgages - And How To Avoid It - Part 2
It should be noted that processing delays and admin problems at mortgage lenders are common and often result in buyers paying several months of unnecessary interest charges as they wait for their mortgage applications to go through.
Of course, the delay is longer if you are switching away from your current lender to a new one, rather than just re-mortgaging with the same one, as I was doing.
My mortgage broker friends tell me that there can be particular problems when a smaller lender comes out with a really attractive rate - and is then inundated with applications and doesn’t have the administrative resources to handle the demand.
Sold Out
In fact brokers say this is becoming an ever more regular issue because what often happens is that lenders will have a small bundle of funds bought at a really attractive interest rate on the money market to offer out.
Often this may be as little as £12m of funds which is often taken up by brokers in days and fully sold out.
Naturally, the lender goes to the top of the “Best Buy” charts but is swamped with a backlog which takes ages to process, thus leaving customers who are re-mortgaging stuck on less than attractive standard variable rates for months.
Future Shock?
Conditions in the market for mortgages change and in the future, of course, one might want to stay on the standard variable rate as this "go too" rate may be the better than any new mortgages on offer.
But as I write this in Feb 2007, the great new deals around certainly mean that you would not want to stay on the standard variable rate for long.
This may all change if the little ill wind blowing accross the pond gets worse and comes here to the UK.
So what to do?
Right now, my advice is to move to the best lifetime base rate tracker deal you can find, just in case the mortgage market turns bad.
That way you will be on a great base rate linked rate for life and you will be laughing even if the mortgage market and mortgage pricing gets tough.
And as it is for life, you won't have to pay another admin fee to a lender to switch onto a new mortgage product.
Today, some lenders are offering base rate trackers at 07% above BOE base rate for life for a fee of about £750. Bite their hands off!
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Labels: buy to let mortgage, buy to let mortgage rates, buy to let mortgages
This entry was posted by lettingfocus, on
Wednesday, February 07, 2007.
