This is something we have been doing a lot of since March. But also generally speaking we have seen more of it since the mini budget in 2022.
In recent years with so many unknowns – wars, inflation, the jobs market etc – a lot of people have put their lives on hold to some degree. Many have wanted some flexibility in order to plan their next steps. They have their sights on moving home, but are unsure when to actually do it.
This success story is more of an amalgamation of a few recent examples we have done this year.
The situation
They all have a similar starting point. We have customers whose deal is coming to an end. They are at a point where they are looking at moving but interest rates are a little high, house prices are a little high and/or nothing has come up that they quite fancy.
We also have customers who are impacted by recent redundancies/job change and being on FTC contracts for example.
Whatever the reason is, they do not want to tie in for 2 years as they would like the flexibility of being able to move. But at the same time, they also do not want to be sat on the SVR (of around 7%).
What we do
In these examples, we are able to search for mortgages with no Early Repayment Charges (ERCs). The upside here is that it gives people the flexibility of being able to move at the drop of a hat without worrying about large fees to pay.
Yes, more mortgages are portable. But what happens if they will not lend you what you want, they do not like the property or they do not accept you at all? So the products with no ERCs give us the extra flexibility.
The upside here is that because they are typically variable (or tracker) products, the rates are normally lower than a fixed rate. Not only are the clients benefitting from the flexibility, it is also usually saving them money on a monthly basis.
We give customers the options at this stage:
- Stick with your current lender and do a Product transfer,
- Switch to a new lender with no ERCs (sometimes you might get lucky and already be with a lender who offers these products),
- Tie in to a new deal and plan everything based on the deal coming to an end in 2 years and be a little more prepared/organised.
Sometimes we have to put multiple options on the table so that we can see what the difference in cost is.
The outcome
I think on all of these scenarios we have looked at recently, customers tend to go with the no ERC products. It is difficult to turn down flexibility and lower rates, even if it does come with the risk of rates going up if the base rate rises.
So far though, there have been no rate rises this year and so all customers are currently reaping those rewards.
I think this is a great example of where mortgage advice comes in. All of those customers were put off by the idea of a variable rate as the news was all about rate rises. But actually it was mortgage rates going up, not the base rate. So none of those customers have been affected by rates increasing.
They also would maybe not have known it was possible to get a mortgage without ERCs.