HUNDREDS of thousands of homeowners could save money by switching their mortgage deals early – without paying a fee.
Three lenders are letting customers move onto cheaper deals up to four months before the end of their mortgage term.
Usually, you would lock in a new rate with your lender up to six months in advance and then automatically move onto it when your old deal ends.
If you want to leave your deal earlier, you have to pay an early repayment charge.
But Halifax, Nationwide and Santander are taking things a step further by allowing customers to make the switch months earlier without having to pay the charge.
And it comes as mortgage rates are dropping and lenders are expected to engage in a price war in January.
The Bank of England lowered its base rate from 4% to 3.75% this month, marking the fourth cut this year.
The base rate helps to inform mortgage rates, and lenders have already been slashing their mortgage deals.
Experts say rates could drop below 3% as early as next spring.
The lowest rate for someone remortgaging is now 3.66% on a two-year fix from NatWest.
It is available at up to 60% loan-to-value (LTV) with a £1,495 fee.
Santander is offering 3.76% on a five-year fix with a £999 fee at the same LTV.
Roughly 1.8million fixed deals are set to end in 2026, according to trade body UK Finance.
What each lender is offering
Santander says customers on a fixed-rate mortgage can lock in a new deal up to four months before their current term ends.
If your new deal is lower than your current one, you can choose to either start it straight away or wait until your current deal ends.
Even if you start it straight away, there is no early repayment charge.
If your new deal is the same or higher than your current one, it will be set up to start when your current deal ends.
You can’t change or cancel your new deal once it’s started.
If you’re with Nationwide and have four months or less left on your mortgage term, you can also apply to switch to a new deal immediately.
The lender says its current customers will get rates as good as, or better than, new customers.
You can apply to switch online using Nationwide’s Mortgage Manager.
Halifax customers can also arrange a new deal up to four months in advance, and can choose to either wait until their current deal ends or move onto the new rate immediately.
However, if there are more than three months left on your current deal then you may still have to pay the early repayment charge.
Depending on how much you’re paying currently and how much you will save by moving onto the new deal, you might still save by switching even if you have to pay the charge.
When is it worth switching early?
You should think carefully before deciding to switch early.
An early switch will be most beneficial for those who took out two-year fixed rates in 2024, as average mortgage rates were much higher then.
The lowest average rate in December 2024 was 4.53% in December, compared with NatWest’s current two-year remortgage rate of 3.66%.
Even so, switching early could be a slight gamble because rates could fall even further.
You should weigh up the savings you’ll make by switching early against whether you believe rates could decrease even more.
Plus, you should always make sure you shop around for the best mortgage deal.
David Hollingworth, associate director at L&C Mortgages, says it’s always important to check what’s available elsewhere.
“With rates falling in recent months and potentially continuing in the new year we don’t know what could be on offer in a couple of months,” he said.
“A mortgage adviser will help make sense of all the options to find the right balance.”
Homeowners who secured rock-bottom mortgage deals in 2020 to 2021 and are just now coming off five-year fixes may not want to switch early.
These people may find the rates they’re being offered now are much higher than what they were paying before.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.