As the MMR approaches what next for mortgages?

Recently, a great deal of media attention has focussed on house purchases and how to stimulate the market to increase the number of transactions. This is rightly an important issue, especially within the New Build property sector, as this is often regarded as a barometer of the wider economy.

As the MMR approaches what next for mortgages?

But what about mortgages? Over the last few years, the mortgage market has seen a gradual decline in the remortgages. This has mainly been due to the low Bank of England base rate, which has meant most customers have either remained on their lenders’ standard variable rate, or on the reversion rate linked to the BoE rate.  However, over the last six months, there has been an uplift in remortgage activity thanks to record low new product rates.

Historically, consumers have by and large taken a two or five year fixed or tracker rate product and then looked to remortgage at the end of the incentive rate. Now however, lenders are just as keen to offer products to existing customers as they are to new ones. If your incentive rate is now coming to an end what do you do next?

It is important that you are aware that there is a change coming this year with the Mortgage Market Review. In the past, lenders would have sent you a list of products and then, by following a set-question process, would identify the product which best suits your needs. The important aspect here is that you, the consumer, have chosen the product and the lender has not provided you with any advice. This is known as a non advised sale. From the 26th April, non-advised sales will not be allowed and it will be an advice driven model – even if you stay with the same lender. As a result, your current lender may well contact you to offer or discuss a new rate and if you initially used a mortgage broker or IFA they may also be in touch.

The question that I would pose is why would you want to restrict yourself to only one lender’s product range? It may be that the best advice for you is to stay with that lender, but someone needs to check the rest of the market for you. Can you do this yourself? Or more importantly, do you have the time, knowledge and inclination to do this on your own?

Other factors also need to be taken into account. Have your personal circumstances changed since the original loan was taken out? You may well have had children or be planning to start a family in the near future. If you have older children they may have started at university, or left home for work reasons. You may have married or divorced during the period of your last mortgage product. All of these different circumstances need to be taken into consideration when ascertaining the right product for you.

What else do you need to look at in relation to the products on offer? There is always a balance between the available rates and the arrangement fees that are attached to them. I would always suggest that this is where a mortgage adviser or IFA can offer advice on the best options open to you. Just because you may stay with the same lender does not mean you should not fully reassess your needs within the context of the wider market. This is what the adviser can do for you, potentially saving you both time and money.

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Categories: Analysis

About Author

Martin Reynolds

Martin Reynolds is chief executive of SimplyBiz Mortgages. He has responsibility for both the day-to-day running of the business as well as its future strategic direction. He has been part of a number of successful ventures including new start ups, rebranding and repositioning businesses within both lenders and distribution during his 25 years in the financial services industry. This has included sales, product development, marketing, credit and underwriting.