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Should borrowers be wary of mortgage product transfer lock-in periods?

ended 06. August 2024

A journalist on the Daily Telegraph is after quick comment from mortgage experts on product transfer lock-in periods.
Nationwide and Santander recently lowered the period to secure a new rate from six months to four.
As rates fall, is it likely that more lenders will follow suit and reduce lock-in periods?
Is this something homeowners should be wary of and should ensure they are proactive?

4 responses from the Newspage community

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Ben Perks
Managing Director at Orchard Financial Advisers
It is highly likely that many lenders will follow suit and reduce back down to 4 months. It was a useful tool during volatile times, I changed a borrowers to better rates 6 times last year, but as rates reduce and stability starts to return the need for securing rates early reduces.
Fewer rate swaps will cut down on Lender admin, hopefully this will result in improved timescales which are a problem area currently with most lenders.
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Simon Bridgland
Director at Charwin Private Clients
The frequency of rate changes means more work in the back office as brokers re-apply for the best available product at each and every change. Lenders know full well that rates are pretty fluid at the moment and gradually trickling downwards so they anticipate many drops during the next 6 month period as lenders tussle for the top spot. Every time they publish new rates brokers request an amendment, so reducing the window of opportunity by a third will save the lenders a bob or two. For borrowers, this translates into them keeping product transfer rates low, if the lenders costs increase due to constant alterations, they will still want to make their margins. Borrowers could leave making arrangements until closer to the end of their current deal, but they run the risk of missing out if a great product is pulled.
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Michelle Lawson
Director at Lawson Financial
Some lenders have reduced the window which is a good thing due to the volatility of the rates as the admin and lender service standards for all parties has taken a hit- expect more to follow suit. Rather than dealing direct with the lender, borrowers should consider using a good broker as they will also monitor any rate changes and apply the new lower rate. By dealing direct, the lenders will note tell you if a new lower rate comes available prior to the new product starting.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
It wasn't that long ago that the switch window for a mortgage was three months. The disastrous period following the economic meltdown of the Liz Truss budget saw rates skyrocket and switch windows were extended to 6 months by many lenders, in response to pressure from brokers. However, the downside to this is it makes pricing mortgages incredibly difficult for lenders, pricing a deal on today's money markets, that won't actually take effect for another half a year is very tricky, and that has led to a very volatile rate market, which we see by the sheer volume and speed of rate changes from lenders, as they are now a lot more exposed to changes in the SWAP rates than when the switch window was shorter. With a move towards shorter switch windows, we are seeing a move back to a more normal market now that the storm has passed. A shorter transfer window will mean lenders are less exposed to money market fluctuations and can maintain product ranges for longer, which helps everyone.