Every year the mortgage clubs have made easy money from the millions of borrowers whose mortgage deal comes to its natural end and who then conclude to make a switch. The customers have had tracker mortgages, or fixed rate deals for a few years, and they find a great deal for themselves.
Lenders have also enjoyed this steady wage stream as re-mortgages ordinarily have a low loan to value ratio and are low risk. As we said, easy money.
But in today's economic atmosphere more and more mortgages are coming up for renovation and switching isn't happening. Citizen don't see any advantage in making a change, and if this trend continues lenders won't see an growth in their lending levels for the foreseeable future.
So is your best bet in these circumstances to take no action? - Well it is if switching isn't going to save you money.
When your mortgage deal comes to the end of a fixed rate, it automatically goes back to the standard changeable rate (Svr) your lender uses. This was costly before and customers looked colse to for great deals on offer elsewhere.
Now Svrs have fallen to unprecedented levels due to the Bank of England's four rapid cuts in their base rate and lenders have been encouraged to pass the cuts on to their customers. Some deals have become cheaper at each stage, but not always by as much of the cut in rates. The median Svr is now 4.99 per cent.
The upshot is that reverting to your lender's Svr is often cheaper than getting a new deal, so re-mortgaging is not as enthralling an option as in the past.
Moneyfacts states that the median tracker rate is 4.11 per cent, slightly lower that the median Svr, while a two-year fixed rate could be a bit higher at 5.05 per cent.
The cost of switching has to be determined too. You'd have to pay your lender an exit fee of colse to 250 pounds to switch to a fixed or tracker rate mortgage with a new provider. You would then have arrangement fees to pay your new lender which, depending on what you are taking on, could cost from one hundred to two and a half thousand pounds.
Suddenly it's clear why it seems like a good idea to stay with your existing lender and go back on its Svr - you're not paying whatever to do that. Also, there are no early refund charges to find.
If yours is a high loan-to-value (Ltv) re- mortgage, that is one where you own very itsybitsy equity in your home, it's even more sensible to stay with your lender and revert to their Svr.
A lender will think you a higher risk if you have very itsybitsy equity in your home. And they will charge you more accordingly. So although the median Svr is 4.99 per cent, if you only had 10 per cent equity, you could pay 6.29 per cent for a two-year fixed rate. You wouldn't even be eligible for a two-year tracker rate.
On a 150,000 pound mortgage this would cost 993 pounds a month. Or if your lender had a lower Svr of 3.5 per cent you would get away with a monthly payment of 751 pounds, rescue 5,808 pounds over a merge of years.
Don't forget though that the V stands for variable, and unlike a fixed deal which is guaranteed, rates can change. If you have 25 per cent or more equity in your asset it might be worth finding colse to for a great deal. The shop is more contentious in these circumstances and you might find a lender with a great Svr than yours.
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