Switching your mortgage to another bank
A lower rate and a cash incentive can be worth thousands, but leaving has costs. Add them up before you move.
Should I switch banks?
Still fixed? Estimate the break fee first.
A comparison over the new fixed term only, with both rates held for that term. Incentives usually come with a clawback of their own if you leave the new bank within a few years (often three to four), and new lending means a fresh credit assessment, so check you would be approved before giving notice. Not financial advice.
What to watch for
Break fees
Leaving during a fixed term can cost a break fee if rates have fallen since you fixed. Switching when the term ends avoids it.
Cashback clawback
A cashback from your current bank usually has to be repaid, in full or in part, if you leave within a few years of getting it.
A fresh application
The new bank assesses you from scratch: income, spending, debts and credit, and may want a valuation. Do not give notice until you are approved.
Legal and discharge fees
A lawyer moves the mortgage and your current bank charges to release it. New banks often contribute to legal costs.
The new clawback
The new bank’s incentive will have its own clawback period, often three to four years, which ties you in.
Ask your bank first
Tell your bank what another lender offers. Many will match a rate or offer something to keep you, with none of the costs of moving.
Questions
Is it worth switching banks for a lower mortgage rate?
It depends on the size of the rate gap and loan, the costs of leaving and the new bank’s incentive. On a large loan, a gap of half a point or more often pays for itself within the first year; on a small loan it may not.
When is the best time to switch?
When your fixed term ends, so there is no break fee, and after any cashback clawback period has passed. Start talking to lenders a couple of months before.
How long does switching take?
Usually a few weeks: approval from the new bank, then the lawyers arrange settlement of the new loan and discharge of the old one.
Will switching affect my credit?
A new application is a credit check, which appears on your credit report. A few checks while shopping around are normal; many in a short time can concern lenders.
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Find a mortgage adviser
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General information, not financial advice.