If you’re a Halifax, Lloyds or Barclays mortgage customer, you’ll need to take note of some new rules around transferring to a new rate with the lenders when your current deal expires.
Mortgage borrowers usually have up to six months to lock in a new mortgage rate when their current deal is coming to an end. Say you have a two-year fixed rate and it expires in March 2025. You could choose a new rate with the same lender now, and if mortgage rates fall between now and March, you can usually transfer to the lower rate with no penalty.
But this six-month time window is shrinking at several major mortgage lenders.
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Halifax and Lloyds are reducing the time period to four months, and Barclays is halving its transfer window from six months to just three months.
Nationwide has already cut its time period to four months, while Santander also lowered its window to four months in June.
These transfer windows refer to “product transfers”, which is when a mortgage customer stays with the same lender, for example by moving onto a new rate when their current deal finishes.
The lenders cite calmer market conditions and changes in consumer behaviour for reducing the time frames.
Nicholas Mendes, mortgage technical manager at the mortgage broker John Charcol, tells MoneyWeek: “As interest rates begin to settle and reduce, lenders are tightening these windows to avoid multiple re-applications, which can be costly and time-consuming. By shortening the product transfer window, lenders can better manage their service levels and ensure their products remain competitively priced.”
How does a reduced transfer window affect me?
The transfer window is particularly important when interest rates are rising, to allow borrowers to grab a new deal before their current one expires and insure themselves against rates increasing further.
But when mortgage rates are on a downward trajectory - and they have been steadily falling over the past few months - the time window is less important.
The average two-year fixed mortgage rate is 5.5%, while the average five-year deal is 5.17%, according to Moneyfacts.
The Bank of England cut the base rate from 5.25% to 5% on 1 August, and markets expect there to be another one or possibly two rate cuts this year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says reducing the six-month window could be detrimental to borrowers “had we been in a rising rate environment. But as we are in a falling rate environment, the borrower shouldn’t be negatively impacted as it’s less important to ‘lock into’ a rate.”
What length transfer windows do lenders now offer?
Santander and Nationwide have already lowered their mortgage transfer windows to four months.
Lloyds and Halifax say they will reduce theirs to four as well, effective from 1 October. However, if you have a mortgage that will mature up to and including 31 January 2025, you can still secure a new deal up to six months in advance of your current deal ending.
For customers whose product matures on or after 1 February 2025, they will be only able to secure a new deal up to four months before their current deal ends.
Lloyds Banking Group, which owns Lloyds and Halifax, tells MoneyWeek: “Our approach offers homeowners both the certainty of selecting a new mortgage rate up to four months in advance, and the flexibility of switching to a better rate that might become available too. And, where rates are going down – customers in the final three months can choose to switch immediately without penalty.”
Barclays has also announced that it will cut its time period, moving to just 90 days from 25 September.
Other lenders like HSBC, Virgin Money and NatWest appear to still offer six-month time windows.
Lloyds Banking Group previously offered a three-month window, but increased it to six months in November 2022 to help customers as interest rates had increased.
Other lenders also hiked their transfer windows following the introduction of the government's “mortgage charter” in June 2023. This support was designed to give borrowers more flexibility at a time when mortgage rates were volatile.
What about remortgaging to another lender?
The time frames above refer to staying with the same lender for the new deal. If you’re looking to remortgage and move to a different lender, you usually still get a six-month transfer window.
Mendes says: “The move by Barclays [to halve the product transfer window to 90 days] could signal an industry-wide shift, leading to tighter timelines for both product transfers and remortgages.”
However, he adds that lenders are naturally keen to win new business, so they may not reduce the remortgage windows.
Indeed, the gap between remortgages and product transfers may actually make borrowers more likely to remortgage to another lender, especially if they want to lock into a new deal earlier.
Tips if your current mortgage deal is coming to an end
If your mortgage deal is ending, check how far in advance you can lock in a new rate beforehand.
You want to try and avoid rolling on to your lender's standard variable rate (SVR), which will be very expensive. The average SVR is currently 7.99%, according to Moneyfacts.
If you secure a new mortgage rate, and then rates fall, you can often ditch the mortgage you secured early without paying a penalty and get one at a lower rate.
Note that most lenders won't let you ditch a deal 14 days or less before the new rate is about to start.
Harris adds: "Should a borrower wish to remortgage away to a new lender, they should allow up to eight weeks for all the paperwork to be completed. Speak to a whole-of-market broker who can look at all the options available to find the best product for you, which may not be with your existing lender."
If you have some spare cash, it can be worth overpaying your mortgage before you switch to a new deal because if you can reduce your loan-to-value you may get a better interest rate.
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