This rate is not a rate that the lender offers to new
customers however it is the rate that existing customers
who are not still on a scheme will be charged.
Please note the graph below is not accurate and is for
illustrative purposes only.
When lenders offer discounts the rate that they offer is
normally calculated from their standard variable rate.
You will find with most mortgage companies their
standard variable rate is an amount over Bank Base Rate
maybe 1% or 2%.
It is also at this rate that lenders can make the most
profit and the longer they can keep existing customers
on this rate the better. For this reason there is a
flourishing re-mortgage market.
When you borrow money from a mortgage lender they
invariably offer you some kind of incentive to join
them. However the catch to this incentive is they
generally apply a penalty if you move your mortgage from
them within a given period of time.
That said once that period of time has elapsed then it
is fair for you to look back onto the market to see if
there is another lender out there who is will to offer
you another incentive for your business.
With that in mind as soon as any mortgage customer has a
deal that ends and they revert to the standard variable
rate with their lender, if they are not in a period of
early repayment charges, they should always consider looking
at the benefits of re-mortgaging.
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