Cashback on BTL and Residential Mortgage Product Switches

Are you one of the 1.8 million property owners who have a fixed rate on their mortgage ending in 2024? If so, I hope you will find the following information useful.

Over the last 15 years, we have been spoilt by historically low-interest rates and have all enjoyed low mortgage repayments on our homes as well as our buy-to-let properties. That was until inflation started to creep up, not least due to the Ukraine War and the effects of Brexit making imports dearer. A disastrous Autumn budget last year by Liz Truss and Kwasi Kwarteng paved the way for swap rates to rocket upwards and send shivers down the spines of the money markets.

Inflation spiralled and mortgage rates shot up to 7/8% temporarily before receding to around 6.25%. With inflation dropping to 7.9% this month from 8.7% the month before, may be a signal that we are nearing the top of the interest rate cycle. Base rate forecasts now stand at 6% down from 6.5%. Future base rate rises may not be as frequent or as steep as we have seen of late.  Swap rates also eased slightly following the news.

The UK is lagging behind Europe and USA whose inflation rates are 5% & 3% Pa respectively. UK perhaps didn’t raise rates as soon as it should have done hence why we lag behind. We have a long way to go and the Bank of England having faced severe criticism is determined to bring down inflation to more manageable levels if not entirely meet the target of 2% set by the Government.  To achieve this it has been using only interest rates as its tool as other measures would prove to be politically unpopular ie raise taxes.

So why is this backdrop so important to you as a borrower and property investor?

If your fixed rate is ending soon you need to be aware that your mortgage payments could easily double or treble because the rates on BTL mortgages (and residential mortgages) are now in the high 5’s and mid 6’s. Longer term rates eg 5 years are a tad lower.

Depending on when your rate is ending will very much decide what rate you will pay assuming inflation and base rates start to level off and fall in 2024 though there are no guarantees that it will, as the War is still there! Global political stability is key to interest rates and economic stability.

Some lenders now allow you to book a rate 6 months prior to your rate ending. Not all allow 6 months prior though, some allow 3,4 or 5 months prior so it’s always good to check when so you can decide what to do. If you’re unlucky to be with a mortgage lender who doesn’t offer a follow-on product you will have only one option which is to remortgage to another lender.

If your lender offers a switching option then you need to know when that can be done and what sort of indicative rates are on offer.  Rates for existing customers may not always be as keen as for new customers. The new payments will undoubtedly shock you. If you’re coming off a 2% rate and going to 6% that’s a 200% increase and any profit you might have seen historically will evaporate. If you are a higher rate tax payer the landscape will be even more dire.

You might need to decide between a 2 or a 5-year rate. Both are high. Or do you opt for a riskier variable rate option knowing that rates are likely to rise in the short term but with a prospect of coming down in due course? The question is when and how fast? That no one knows for sure.

Taking expert advice is key. You need to understand the options and choices and arrive at a well-reasoned conclusion that you can look back at in a few years and remember why you chose a particular route. Not everyone will get it right.

The icing on the cake is that if you switch your mortgage product through our recommended broker for this type of work ( not a remortgage to another lender ) they will give you a CASHBACK and NOT charge a broker fee

This offer applies to both residential and buy-to-let mortgages for a product switch only.

If there is a better deal available with another lender they will inform you of that option and quote for the full re-mortgage.

If you switch directly with the lender they will not offer any CASHBACK!

To get in touch with our recommended broker and discuss your options in confidence please use the form below.

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