Don't move house - move your mortgage

Remortgaging has reached record levels as growing numbers of people become aware of the savings they can make by moving their mortgage to another lender.

Official figures out this week show that last month, for the first time ever, remortgages accounted for a third of all the home loans granted - in October 1999 they made up less than a quarter of the total.

The surge in interest in switching your home loan partly reflects the competition in the mortgage market, which has resulted in a plethora of attractive deals.

Experts say it also reflects the fact that people are now more savvy when it comes to products such as mortgages. The internet has contributed to this, putting borrowers in the driving seat by letting them browse the various offers on the market.

Below we look at some of the best deals around for those looking to remortgage.

There can be huge sums at stake. Ray Boulger at mortgage broker Charcol says many people can easily slice a quarter off their mortgage payments by switching, up to £100 or even £200 a month.

While the typical bank standard variable rate is 7.74%, there are two and three-year fixed rate and discounted deals available as low as 5.24%.

The message has to be that if you're sitting on your lender's standard variable rate, and there are no lock-in redemption penalties tying you in, you are simply throwing money away.

Your options are to talk to your lender to see if they will do you a better deal, or walk away and take another lender's deal. If you've been a good customer, your lender won't want to lose you, so get on the phone to them.

The cut throat competition means some lenders are pro-actively talking to their customers about better deals. Halifax is currently writing to 200,000 existing borrowers a month offering them the chance to move to other deals such as tracker loans (where the rate you pay follows the ups and downs of the Bank of England base rate) or fixed rates.

You might want to check out the deals on offer by surfing the net or scanning the Jobs & Money best buys before you talk to your lender.

If they can't come up with anything attractive, think seriously about taking your custom elsewhere. Many people perceive that a mortgage transfer is a huge, costly hassle. In truth, it does take a bit of sorting out, and you will probably have to dig out documents and fill in some forms. Many lenders are so desperate for your custom that they will pay your legal costs, waive the arrangement fee and throw in a free valuation as well.

If you are locked in to your current loan by early redemption penalties, it's not quite so simple. You will need to make sure that paying the penalty and going elsewhere will cost you less than staying on your current rate. One estimate is that only about 25% of people who do have redemption penalties would enjoy sufficient savings by remortgaging to make it worthwhile paying the penalty and moving.

So what good remortgage deals are on offer? Charcol says that Coventry Building Society is offering some competitive remortgage deals only available via its website, www.remortgages.co.uk for those happy to arrange their mortgage over the net.

They include a fee-free fixed rate where what you pay is pegged at 5.39% until February 28, 2003, and a fee-free discounted rate giving 2.35% off the standard rate until the same date (initial payment rate: 5.35%). Neither has early redemption penalties at any time.

Charcol is offering its own almost fee-free remortgage where you get a 2% discount off the 7.75% standard variable rate in the first year (giving a current payment rate of 5.75%), a 1.85% discount in the second year, and 1.7% off in the third year. The deal is funded by the Woolwich and is flexible.

While there are redemp tion penalties within the first three years, you are allowed to pay back up to 25% of the mortgage each year without penalty. There's a £49 booking fee.

Bath-based broker London & Country Mortgages highlights several deals.

On the fee-free front, Halifax is offering a tracker deal giving 0.45% off the bank base rate for two years, which means a current pay rate of 5.55%. The deal is completely free of redemption penalties.

Halifax also has a deal fixed at 5.65% until February 28, 2003. With this, there is a £195 arrangement fee and redemption penalties only within the period. Both loans require a deposit of 25%-plus.

Britannia Building Society has a deal giving 2.4% off the standard rate for two years, giving a current payment rate of 5.24%. There is a £195 arrangement fee, there are no redemption penalties at all, and a deposit of at least 25% is required.

Northern Rock is offering a loan fixed at 5.39% until January 1, 2003 but there is a £495 fee to pay. There are redemption penalties within the period.

National Counties Building Society has a discount mortgage capped at 5.69% until June 1, 2003 with a guaranteed discount of 1.5% off the standard rate.

There is a £300 completion fee to pay and there are penalties within the period.

Early Christmas present for borrowers

Nationwide building society this week gave many of its 1.25m borrowers an early gift in the form of a mortgage rate cut which will reduce the bill of borrowers with an average sized loan by £10 a month, writes Rupert Jones .

It has trimmed its standard variable mortgage rate by 0.2%, taking it down to 7.09% - significantly lower than the 7.74% charged by rival lenders such as Halifax and Abbey National.

The move affects those on the standard variable rate and on discounted deals, but won't of course have any impact on those with fixed rate loans. Nationwide says a typical £60,000 interest-only borrower on the standard rate will see their bill cut by £10 a month, while a £100,000 borrower will see a £16.66 a month saving.

The bad news is that savings rates will also be reduced.

Many borrowers with rival lenders will wonder whether they too will be treated to a mortgage rate cut. While experts think it's unlikely the Halifax et al will immediately follow the Nationwide's example ahead of any Bank of England base rate move, some commentators took the view that the picture could change over the coming months.

Many economists now believe interest rates have peaked, and mortgage broker Charcol says that when the first base rate cut does arrive, it is possible some lenders may drop their borrowing costs by more than the amount of the reduction. So if there was a 0.25% base rate cut they could lop, say, 0.35% off their standard variable mortgage rate.

Johannes Kennard at mortgage broker London & Country adds: "At some point you are going to see lenders doing something. I cannot believe that Nationwide is going to be out there on its own."