I haven't begun making payments on my fixed-rate mortgage. Can I switch rates?

Q I completed a remortgage with Britannia Building Society on October 8 for a two-year fixed-rate of 4.79%. I noticed just yesterday that it is now offering 3.59% and, as the first payment on my new mortgage is not due until November 8, I rang to see whether I could switch to this new rate.

The loans processing department told me that as my loan was so new I would be able to switch over to a new product if I paid the new arrangement fee, but I would have to speak to the sales department. But the sales team said I couldn't switch to the new product unless I paid the redemption penalty on my existing mortgage.

Is there anything I can do? Since I haven't yet made a payment on my new mortgage it seems unreasonable not to allow me to switch to the new product, particularly as I'd be paying the new arrangement fee.
SE

Q The argument as to whether this is unreasonable or not depends on which side of the fence you're looking from. Britannia might feel it's entirely unreasonable of you to expect to move to a new mortgage rate despite having agreed to a two-year fix, without expecting to pay the redemption penalty.

After all, if you were trying to switch to a lower rate with another lender, you'd obviously have to pay the early redemption charge (ERC).

I'm normally against ERCs but in this case I think you're being a bit unfair on Britannia. The point at which the mortgage debt becomes yours is the day before completion, when the funds are released by the lender, so even though you haven't made a repayment yet, you are still bound by the terms of your mortgage. It's just a case of unfortunate timing that the new rate became available after you had completed - but new rates become available all the time, and there will be countless other rates and deals on offer during your fixed rate period.

I suspect that whoever told you it would be OK to switch to a new loan was utterly incorrect, as I can't imagine any lender in today's highly competitive mortgage market allowing a customer to switch rates at will without paying charges.