Will I find a better mortgage rate?

Q I have an interest-only ?58,000 mortgage with Yorkshire Building Society that will be free of redemption penalties by the end of March this year when its five-year capped rate of 5.4% comes to an end.

I plan to pay off the entire mortgage in April next year when I get a retirement lump sum. The best rate Yorkshire Building Society is offering me is base rate plus 0.75%. Do you think I could do better?

RP

A The most important issue for you to remember here is that you don't want to tie yourself in to anything that lasts for longer than a year, or that imposes early redemption charges for a period after any one-year fixed, discounted or capped rate ends. This means that the loan you end up with might not have the cheapest headline rate, but could still be the best one for you.

You are unlikely to shave much off the YBS' proposed 4.75% rate and still have a loan with the sort of flexibility you need. Given the size of your loan, remortgaging would only really be worthwhile if you could find a fee-free deal. Even so, Ray Boulger of Charcol says you're unlikely to do better than bank base rate plus 0.4%, which would save you no more than a couple of hundred pounds. That alone might not make it worth your while to switch lenders for just 12 months.