Welcome to the brokers blog; where we discuss the latest developments, common queries, spurious sources and the sublime, ridiculous and esoteric aspects of the mortgage industry.
The Mortgage Market’s Misleading Buy Signals
Introduction: The Danger of Buying on Fictional Signals
In today’s mortgage market, consumers are regularly bombarded with “headline rates”, slick illustrations, and alluring “best buy” tables. But buried within the details of these offerings lie calculations that can be actively misleading — Annual Percentage Rate of Charge (APRC), reversionary rates, and total cost over term; being the main offenders.
While these metrics were introduced with the aim of transparency, they risk distorting buyer decision-making. Too often, borrowers choose a mortgage product based on hypothetical, long-range assumptions — ignoring the far more practical reality that most borrowers don’t keep the same mortgage for 25 years; and likely shouldn’t. This article explains why it’s time to adopt new benchmarks.
What Are APRC, Reversion Rates, and Overall Cost — and Why Do They Mislead?
APRC (Annual Percentage Rate of Charge)
The APRC is intended to show the annual cost of a mortgage, averaged over the entire term (usually assumed to be 25 years), and including interest, fees, and charges. It’s meant to allow an “apples-to-apples” comparison between different mortgage products.
But this logic breaks down in practice. Most borrowers remortgage every 2 to 5 years. Few — if any — ride out their initial deal only to sit on their lender’s reversion rate for the next 20+ years. So, including that reversionary period in the APRC becomes not just irrelevant, but actively deceptive.
Moreover, by extending the calculation across decades, lenders can make a product look cheaper overall — even if it costs more during the period you’ll actually keep it.
Reversion Rates
The reversion rate is the variable interest rate you fall onto once your initial fixed, tracker, or discount deal expires. The rate is usually the lenders standard variable rate which itself is not formally tied to the Bank of England base rate and is entirely at the lender’s discretion to alter (although a few lenders may offer a reversion rate which is linked to the BOE rate with a significant margin applied).
The issue? Reversion rates can move significantly during the term of your initial deal. A lender whose SVR seems competitive today may be wildly uncompetitive two years from now. As the reversion rate is used in calculating the APRC, then the resulting figure is based on a complete fiction.
It also incentivises bad behaviour — the borrower who doesn’t switch products at the end of their term is effectively penalised, while the product looks better on paper to those who assume they’ll always remortgage. It’s a lose-lose.
Overall Cost Over Term
Mortgage illustrations show the “total cost” of a mortgage over the term, typically 25 or 30 years as well — treating the reversion rate as statis and assuming no changes in behaviour. Again, this assumes the borrower never switches lender, never redeems early, never moves house, and never makes overpayments. This is rarely the case.
And because this figure is calculated using the reversion rate for all years beyond the initial deal, it embeds the same misleading assumptions that plague the APRC.
Why the Reversion Rate Should Be Largely Ignored
For most customers, there is simply never a time to be on a reversion rate in day-to-day trading.
The circumstances where a reversion rate would be competitive are extremely rare. And even for someone who believes they are selling their home and have a new mortgage application in mind; the existing loan could frequently be converted to a deal with no early repayment penalties on a significantly lower rate and redeemed without loss.
If that house sale falls through though, and three months turn into a year, then that switch could save thousands and take a matter of hours to affect.
It’s extremely rare for a reversion rate to compete with new product offerings. So, unless you have such a small balance remaining on your mortgage that large changes in rates amount to differences of a couple of hundred pounds a year, the effort involved in switching is almost always warranted.
And yet: there is no regulatory obligation to advise customers to shop around before their deal ends, but there is an obligation to include outmoded cost indicators that bear little real-world value.
The Right Metric: Cost of the Initial Deal Period
If most borrowers remortgage every 2–5 years, then the most useful comparison metric isn’t the APRC — it’s the effective cost of the initial deal period, taking into account:
- Initial interest rate
- Product fees (including arrangement and valuation costs)
- Cashback or incentives
- Exit charges or early repayment charges (ERCs)
- Legal or broker fees (where applicable)
- Trailing interest (some lenders may lock you into a month of interest at the higher reversion rate at the end of the deal, equivalent to a hidden fee of a few hundred or even thousand pounds depending on loan size).
This provides a far more grounded basis for comparing one deal to another in a meaningful way — i.e., the way most borrowers actually behave.
But even this needs to be done properly. Comparing “costs” based on monthly payments alone ignores the amortisation structure — how your payments are split between interest and capital. A product with a slightly higher rate but lower fees might cost less overall over two years than a low-rate, high-fee option.
Why You Need to Use an Amortisation Calculator
Accurate product comparisons require more than looking at monthly payments or percentage rates. They require amortisation analysis — a breakdown of exactly how your loan is repaid over time.
A mortgage amortisation calculator allows you to:
- Compare total interest paid during the initial deal
- Assess the impact of fees and incentives
- See how early repayment or overpayments affect the cost
- Plan refinancing strategies with real figures, not illustrations
Far too many borrowers simply take a rate and apply it to the loan balance without factoring in fees, repayments, or even time. That’s not enough.
A robust amortisation tool is essential if you want to optimise your borrowing strategy over time — especially if you’re the kind of borrower who proactively manages your debt.
Conclusion: It’s Time to Retire APRC in Favour of Real Cost Comparisons
The APRC and total-cost-over-term metrics served a regulatory purpose. They aimed to force consistency in advertising and encourage disclosure. But they’re now little more than a compliance formality — and in many cases, a dangerous distraction.
The industry — and borrowers — need to focus on real costs, over real horizons, and ensure that product comparisons reflect how people actually manage their mortgages.
Until we replace the APRC with something that captures that reality — ideally, a cost-over-initial-period metric backed by amortisation data — buyers will continue to be lured by the wrong signals, and some will pay thousands more than they needed to.
Applying for a mortgage while on maternity leave can feel daunting. Lenders scrutinise your income to assess affordability, so any deviation from standard employment (including maternity pay) can raise questions.
This article explores the topic in a Q&A format, addressing how lenders treat maternity leave and what documentation you’ll need to secure your mortgage.
Q1: Can I get a mortgage while on maternity leave?
In short — yes, you can. Most UK mortgage lenders will consider applicants on maternity leave, provided they can demonstrate a return-to-work plan and affordability based on their regular income. The key is to show that your long-term income supports the mortgage payments, even if your current income is temporarily reduced.
But every lender’s approach to calculating this is different. So, if you’ve spoken to your bank or existing lender and been told they can’t help, get in touch. It’s our job to delve through the market and find lenders whose criteria you do meet.
Q2: What income do lenders use when assessing my application?
Lenders usually base affordability on your return-to-work salary, not just your current maternity pay. You typically need to provide:
- A letter from your employer confirming:
- Your current maternity leave status
- Your expected return-to-work date
- Your contracted hours on return
- Your salary on return
- Recent payslips (from before maternity leave)
- A current payslip — unless you’re on extended leave and receiving no pay
Many lenders require your return to work to be within a set timeframe, typically three months. But not all do — competitive lenders may consider your full return-to-work income even if the return date is further away.
In such cases, most will want to see how you’ll cover any shortfall in the meantime if the mortgage starts before your return — typically using savings.
Q3: Will potential childcare costs affect how much I can borrow?
Yes, if you’re buying a residential property. For buy-to-let properties, usually not.
For residential loans, lenders will ask what childcare costs you expect upon returning to work. But affordability calculations are complex — someone with a high household income and no debts may find their maximum loans unaffected. On the other hand, those with significant commitments, lower income, or other children may see a drastic difference.
If you don’t expect to have childcare costs on return, that’s fine — as long as your explanation is realistic. Many families rely on relatives or alternate shifts to manage care, but if the lender doubts your reasoning, your application could be declined.
Buy-to-let affordability is assessed differently, with rental income taking priority. In that context, childcare costs have little or no effect on borrowing potential.
Q4: What if I don’t plan to return to work full-time?
If you’re returning part-time or not at all, lenders will assess your affordability based on your expected income — not your previous full-time salary. Be upfront about any changes.
Lenders may consider your partner’s income or accept other sources (e.g., benefits, rental income) to support the application.
On the plus side, returning part-time often reduces your childcare costs, which can help offset the lower income.
Q5: Will lenders consider statutory maternity pay (SMP)?
Some will, but it depends on the lender. SMP alone is rarely sufficient to support a mortgage on its own — but it can be included as part of total household income.
If your return to work is confirmed, SMP can still help with affordability in the short term, especially if paired with your partner’s income or savings.
Q6: Can I use Child Benefit or other family-related income?
Yes — some lenders include Child Benefit or Child Tax Credit in affordability calculations, but usually only if the child is under a certain age and payments are stable.
Universal Credit and similar benefits are treated more cautiously due to variability.
Q7: Does being on maternity leave affect my credit score?
No — maternity leave itself does not affect your credit score. However, reduced income might impact your ability to manage credit or bills, which can affect your profile. It’s important to stay on top of financial commitments during this time.
Q8: Will being pregnant or on maternity leave affect a joint application?
Only in terms of the maximum loan and the choice of lenders, as discussed above.
Your partner’s income will still be considered in full if it remains unaffected. If you’ve opted for shorter maternity leave and extended paternity leave for your partner, the assessment will be similar — lenders will still focus on return-to-work income, timing, and employer confirmation.
Q9: What if I’m self-employed and on maternity leave?
Since income assessments for self-employed applicants are usually based on tax returns up to 18 months old, it’s possible that your maternity leave won’t appear in your accounts.
That said, it’s crucial to be transparent. If your income has recently reduced due to taking time out, your broker needs to know so they can match you with lenders whose rules accommodate this.
If the income appears stable — and your break hasn’t significantly affected turnover — then lending outcomes may remain largely unaffected.
Be aware: lenders increasingly use credit reference data and open banking to cross-check income consistency, so honesty is critical.
Q10: What’s the best way to strengthen my application?
Simple: Work with a broker.
Despite what you may hear, getting a mortgage isn’t about “strengthening” your application — it’s about applying to the right lender.
Most lenders don’t make case-by-case decisions. They follow rigid lending criteria — you either fit their model or you don’t. That’s why matching your profile to the right lender matters far more than perfecting a “generic” application.
And this principle doesn’t just apply to maternity leave. It’s true for all scenarios — income type, property type, credit history, and more.
Final Thoughts
While maternity leave can complicate a mortgage application, it doesn’t have to be a barrier. Lenders ultimately care about long-term affordability, not just your income at the moment you apply.
With the right paperwork — and the right broker — you can secure a competitive mortgage and plan confidently for your family’s future.
Many self-employed applicants believe they’re at a disadvantage when it comes to securing a mortgage.
But the problem isn’t eligibility—it’s self-advising. The rules lenders apply to income calculations for the self-employed are often complex, technical, and vastly different from one another. What confuses many is not whether they can get a mortgage, but how their income will be assessed—and how that assessment can swing their borrowing potential by tens or even hundreds of thousands of pounds.
This post unpacks the different classifications of self-employment—sole traders, limited companies, partnerships, LLPs, and contractors—and examines how lenders treat each. Whether you’re new to self-employment or an experienced business owner, understanding this will give you clarity—and a significant advantage when applying.
When Are You Considered Self-Employed for a Mortgage?
You may think you’re employed, especially if you’re on payroll—but if you own 20% or more of the business you work for, many lenders will treat you as self-employed and virtually all will work this way if you exceed 24% ownership. That means you’ll need to provide different types of income evidence than a standard employee would.
Being “self-employed” in the eyes of a lender doesn’t just refer to being your own boss—it’s about ownership, control, and liability.
How Sole Traders Prove Income: SA302s, Accounts, and Lender Variations
What is a Sole Trader?
A sole trader is a self-employed individual who owns and operates their business as a private individual. There’s no legal distinction between personal and business assets. It’s the simplest business structure in the UK and often used by freelancers, tradespeople, and consultants.
How Lenders Assess Income
Lenders will nearly always ask for:
- SA302s (tax calculation summaries from HMRC)
- Tax Year Overviews (TYOs) confirming tax paid
They’ll typically use your taxable profit as the income figure. But this is where it gets nuanced:
- The number of required years trading will vary; giving differing lending amounts.
- Some lenders may allow adjustments for capital allowances (like investment in equipment) which reduce taxable profit but don’t are not ongoing expenses.
- A small number may instead use operating profit from formal accounts—but only when these are professionally prepared.
Limited Company Directors Mortgage Rules: Salary, Dividends, and Retained Profit
What is a Limited Company?
A limited company is a distinct legal entity from its owners (directors/shareholders). Profits belong to the company, not the individual, and are typically paid out as a mix of salary and dividends.
How Lenders Interpret Income
This is where things really fragment:
- Some lenders use salary + dividends reported on SA302s. But other will use the company accounts, offering two different year ends, and very different lending amounts.
- A few consider retained profits (undrawn earnings left in the company) using:
- Net profit before tax
- Or operating profit (with or without director’s remuneration)
Different documents often cover different time periods, so two lenders may assess two different years—leading to wildly different loan sizes.
And if your company has:
- Large retained profits
- Heavy capital allowances
- Temporary R&D losses
- Or rapid growth in recent trading
…then some specialist lenders may ignore these anomalies or allow income to be based on just one year’s strong performance.
In short: your income could be £30,000 or £130,000 depending on which lender is looking.
Directors Loan Account Income in a Mortgage Application
Some company directors will be drawing income from a “directors loan account”. Often this is a notional deductible for tax-purposes created when parts of a business are sold or transitioned from one type of ownership to another.
Whilst great for tax purposes; directors loan account income is relatively toxic from a mortgage point of view with most lenders refusing to consider it. However, some may and this will be an income type where it highly unlikely you will successfully self-advise on a mortgage.
LLPs and Partnerships: Mortgage Evidence Rules for Business Partners
What is a Partnership or LLP?
A Partnership shares ownership and liability between individuals. A Limited Liability Partnership (LLP) allows partners to limit personal liability, functioning somewhere between a general partnership and a limited company.
Lender Preferences
Many lenders will look at:
- Your share of taxable profit from SA302s
- Tax year overviews
- Sometimes, partnership accounts showing total firm performance
However in LLP’s:
- Some lenders require returns from all partners, which can be extremely prejudicial in firms like law practices with 100+ partners.
- A few lenders may exclude unusual deductions (e.g. one-off R&D costs) or base assessments solely on the applicant’s income share.
Once again, approaches vary significantly. Some focus strictly on the individual; others scrutinise the firm as a whole. So using a competent mortgage advisor will make the process far simpler.
How Many Years of Accounts Do You Need for a Self-Employed Mortgage?
- Most high-street lenders want two years of accounts or tax returns.
- Some prefer three years, especially if profits are volatile.
- A growing number of lenders—both high street and specialist—can work with just one year of trading, especially with strong performance and sector stability.
This is key for startups or professionals transitioning into new business models. The quality and consistency of the accounts often matters more than time alone.
Changing from Sole Trader to Ltd Company: Does It Affect Your Application?
Switching from one business type to another? Lenders may see this as a continuation or a new venture—and it’s not always clear-cut.
Common Examples:
- Sole trader incorporating into a limited company: Some lenders treat it as the same business. But if a new shareholder (like a spouse) is added for tax planning, others may deem it a new business entirely.
- Running both sole trader and limited company simultaneously: This is usually problematic as one side of the income is decreasing significantly (and therefore often disregarded) whilst the other increases (and therefore gets averaged down). Avoiding this arrangement is generally best for mortgage purposes.
- Changes in trading activity: If your business has entered new markets or taken on new partners, many lenders will reset the clock on required trading history.
Can Contractors or CIS Workers Be Treated as Employed by Lenders?
What Are CIS and Day-Rate Contractors?
- CIS (Construction Industry Scheme): Self-employed but paid with tax deducted at source.
- Day-rate contractors: Typically IT, engineering, or creative professionals with consistent contracts.
How Lenders Treat Them
Some lenders assess these individuals as employed, using:
- A calculation like day rate × 5 × 46 weeks
- No need for two or three years of accounts
This can be especially helpful for:
- People who’ve just gone self-employed
- Those transitioning from salaried employment in the same industry
- Applicants with day/weekly contracts at equivalent or higher income levels than before
But this is an area where many lenders will not treat you in this preferential way, and for those that do it is dependent on lots of other widely varying criteria like income level, contract duration, length of industry sector experience etc. Hence using a mortgage broker is a good idea to navigate this complexity.
Why Income Evidence Changes How Much You Can Borrow
Even among reputable high street lenders, loan sizes can vary significantly based on:
- Income calculation method (SA302s vs accounts)
- Treatment of capital allowances
- Consideration of retained profits or R&D losses
- Number of trading years accepted
It’s not uncommon for one lender to offer £120,000 while another offers £320,000 to the same applicant.
Why You Should Use a Mortgage Broker if You’re Self-Employed
If you’re self-employed—whether as a sole trader, LLP partner, contractor, or limited company director—your mortgage journey is entirely navigable, but not intuitive.
Getting it right means:
- Understanding how lenders interpret income
- Knowing which documents to present—and when
- Matching your business structure to the right lender criteria
But this is only one aspect of your application, and all the others are equally complex and varied. And that’s why an experienced mortgage adviser makes the difference. We help ensure you’re assessed accurately and fairly, maximising your borrowing potential with the minimum of stress.
When it comes to building your credit profile, the internet is awash with well-meaning advice. Credit reference agencies often promote a strategy of regular borrowing, spending on credit, and applying for new lines of credit to “build a score.” But for many aspiring homeowners—especially those early in their UK financial journey—this guidance can be more harmful than helpful, at least in the short term.
This article explores how credit scoring really works when it comes to mortgage applications, why “building credit” through borrowing may backfire, and why you may already be mortgage-eligible—even if you’ve never had a credit card.
The Credit Building Myth: Why More Isn’t Always Better
Credit reference agencies like Experian and Equifax frequently advocate a proactive approach to credit building: take out a credit card, use it regularly, repay in full, and consider increasing your credit limit over time. These actions, they argue, demonstrate responsible borrowing and improve your score.
But here’s the catch: these same activities often create red flags for mortgage lenders.
- Too many credit applications in a short space of time? That’s a hard search footprint spree—mortgage lenders might see you as financially desperate. It’s also a high-risk indicator for identity fraud.
- Multiple credit cards or high balances, even if managed well? That can raise concerns about your overall debt-to-income ratio and signal over-reliance on credit or a debt appetite that could become unhealthy.
- New lines of credit shortly before a mortgage application? Many lenders interpret this as financial instability.
So, while your numerical score might be inching upwards, your mortgage eligibility could be quietly sliding downwards.
What Lenders Actually Want to See
Contrary to popular belief, mortgage lenders don’t just look at your “credit score” as a magic number. They consider a broader financial portrait, including:
- UK address history (residency length and consistency)
- Presence on the electoral roll (if possible)
- Current credit commitments (and how stretched they make your finances)
- Bank account stability
- Affordability assessments based on income—not just credit
In fact, most applicants with just one or two UK current accounts, a mobile contract or a utility bill will pass credit scoring—even at high loan-to-value ratios—after just a year or two of UK residency.
This is especially true if they’ve kept their credit history clean (i.e., no missed payments, defaults, or excessive credit usage) and have consistent address history.
Other factors also affect things. Regularly moving home, borrowing high income multiples, or financial pressures like having dependents may also impact your score.
No Credit? No Problem—Sometimes
A common misconception is that “no credit history” equals “bad credit.” But this isn’t always the case.
There are plenty of borrowers who have:
- Never taken out a credit card
- Never had a loan
- Lived in shared accommodation since childhood (so no bills in their name)
- Just opened their first UK current account
And yet—they pass credit scoring for a mortgage.
How? Because lenders weigh up a combination of risk factors. For many mortgage providers—especially those operating in the high loan-to-value space or serving younger borrowers—the absence of credit data is not automatically a dealbreaker. It’s certainly better than a credit file littered with missed payments, payday loans, or an overabundance of credit utilisation.
To put this into context: we recently had an application approved by a high street lender, on top-tier rates, for a foreign national with only 18 months’ UK residency, a 15% deposit, and no credit data at all. She was also a fixed-term contractor.
On the flipside, we’ve seen applicants with very high incomes, good credit history, big deposits, and high scores declined for reasons such as over-utilisation of available credit or an excessive debt-to-income ratio.
What Does Harm Mortgage Eligibility?
Here’s where the contradiction becomes obvious. While general credit advice pushes borrowers toward more borrowing, the factors that can seriously harm your mortgage chances include:
- Multiple hard searches in the last 3–6 months
Lenders see this as high-risk behaviour. It suggests financial strain or desperation.
- Too many active credit lines
Even unused cards can cause concern because of potential borrowing power.
- High credit utilisation
Using more than 30% of your available credit—especially if near the limit—can make you seem financially stretched.
- High debt-to-income ratio
Even if all your payments are up to date, owing sums that account for a high proportion of annual income indicates a higher risk of default.
- Short UK residency
Newcomers are already subject to stricter scrutiny. Layering risky credit behaviour on top can lead to an outright decline.
Incorrect information is also a major factor in failed credit scoring for those with limited credit data.
Credit scoring is a risk assessment system. The less data held on an individual, the greater the importance of consistency. With the rise of online account management, it’s easy to forget to update your address on your mobile phone, PayPal account, or a dormant bank account.
But inconsistency heightens the perception of risk. So it’s vital for those with limited data to ensure their records are consistent, up to date, and accurate.
We even saw one applicant declined—despite a good income, clean credit, and a large deposit—simply because he had numerous accounts under his nickname “Brad” instead of his legal name “Bradley”. Issues like this can take months to fix, so address them as early as possible.
A Smarter Approach: Focus on Stability & Accuracy—Not Activity
If you’re planning to apply for a mortgage in the near future, the best credit advice is actually quite simple:
- Avoid new credit applications for at least 3 months before applying.
- Don’t take out credit unless absolutely necessary.
- Keep existing accounts open and in good standing—but use them sparingly.
- Register on the electoral roll at your current address if eligible.
- Maintain consistent UK address history.
- Get your statutory credit report for free from Experian, Equifax, and TransUnion.
- Ensure your information is accurate: use your full legal name, correct date of birth, and current address across all active accounts.
- Use a good mortgage advisor.
In short, less is often more. Yes, it’s in our interest to suggest using a broker—but it’s also in our interest to help you succeed. If you’re declined, we don’t get paid either. That’s why we work from a “first, do no harm” perspective—using credit checks sparingly and only with lenders aligned with your profile.
Final Thoughts: Rethink the “Credit Score Game”
The idea that you must be constantly borrowing to prove your creditworthiness is deeply flawed—especially in the mortgage world. For many borrowers, particularly young adults and new UK residents, overplaying the credit game can actively harm short-term eligibility.
Mortgage lenders want to see financial responsibility, not financial activity. That means stable accounts, low or no debt, and consistent behaviour—not a long list of hard credit checks or juggling multiple cards.
While using credit doesn’t inherently harm your score—and may help build it over time—it’s not a panacea for credit worthiness.
Before you take out that next credit-builder card or personal loan, ask yourself:
Is this helping me in the long term—or just ticking a box on a generic credit checklist?
A Common Question from Thoughtful Clients
One of the most frequent and understandable questions I hear from clients—particularly in times of economic uncertainty or media speculation—is:
“Should I wait to apply for my mortgage in case the Bank of England reduces the base rate?”
It’s a smart question, and it’s always wise to consider timing when making any major financial decision. However, the reality of how mortgage pricing works—particularly with fixed rate products—means that waiting rarely delivers the benefit clients hope for. In fact, it can often work against them. This article aims to unpack why that is, by taking a look at how fixed, tracker, and variable rates work, and how lenders operate behind the scenes.
How Fixed-Rate Mortgages Are Priced
Fixed-rate mortgages are not directly linked to the Bank of England base rate in the way some expect. While the base rate does exert influence on the overall interest rate environment, fixed mortgage pricing is typically based on market forecasts and expectations for interest rate movements over the term of the deal—usually 2, 3, 5, or 10 years.
Lenders use instruments like swap rates (essentially, what it costs them to borrow money for a set time) to set pricing. These swap rates are shaped by how financial markets predict interest rates will evolve, not by the rates themselves. So if a base rate reduction has been anticipated for weeks or months, the likely pricing impact will already have been “baked in” ahead of the Bank’s announcement.
A swap rate also encompasses other factors like Gilt and Bond Yields, that compete for funding but can work in converse relationships to central bank interest rates. So Swap rates could be increasing when Central Bank Rates are decreasing.
Moreover, lenders don’t update pricing overnight. Adjusting a product range involves not just repricing, but internal sign-offs, marketing updates, risk reviews, IT platform updates, and strategic planning. Lenders will also consider how aggressively they want to compete, what volume they aim to lend, and which customer profile they want to attract. Because of this, it can take days or even weeks for meaningful reductions to filter through—and even then, they may not be as significant as hoped.
Tracker, Variable, and Discount Rates: How They React to Base Rate Changes
Tracker products are somewhat an exception. These are directly pegged to the Bank of England base rate, typically with a small margin added (e.g., base +0.75%). This means they change almost immediately when the base rate moves. So, if you’re considering a tracker, there’s no need to “wait” for reductions—they’re automatic.
On the other hand, standard variable rates (SVRs) and discount rates, which are usually set by the lender, are a bit more opaque. While SVRs do tend to follow the Bank of England base rate over time, there is no obligation for lenders to pass on reductions at all—or to pass them on immediately. They may wait weeks or months, or choose not to reduce them at all, depending on internal margins, funding costs, and business strategy.
The Risk of Waiting for Rate Drops When Remortgaging
For clients looking to remortgage, the cost of waiting can be particularly high. If your current fixed deal is coming to an end, and you don’t secure a new product in time, you’ll usually revert to your lender’s SVR—which is often several percentage points higher than new fixed deals on the market.
If you delay applying in the hope that rates will drop, you risk:
- Falling onto the reversion rate, which is significantly more expensive.
- Running out of time to move lenders, which may limit you to a less competitive product with your current lender (who may not be offering their best rates to existing customers).
- Exposure to changes, as you secure the deal when you apply, you risk increases whilst you wait.
- Missing savings, as the extra monthly payments on the SVR can quickly offset any future gains from a small rate drop.
Unless we were anticipating a dramatic, sudden rate cut—which is historically rare—waiting simply doesn’t tend to pay off.
Once You Apply, the Flexibility is Yours
Another often overlooked advantage of applying early is that you usually lock in protection against rate increases once your application has been submitted.
Better still, most lenders allow us to switch you onto a lower rate, if they release one, right up to a couple of weeks before completion. This provides the best of both worlds—you’re shielded from potential increases but can still take advantage of reductions if and when they occur.
That’s why our standard process is to continue checking for better deals after your offer is issued, and we’ll let you know if a better rate becomes available with your lender during your transaction.
Final Thoughts: Waiting May Cost More Than It Saves
While no one can predict the market perfectly, experience has shown that trying to “time” the mortgage market is often a losing game. Yes, lenders come in and out of competitiveness, and from time to time the perfect deal may appear—briefly. But trying to wait for that perfect moment often results in missed opportunities, limited options, or higher costs.
In most cases, the wisest move is to apply sooner rather than later—secure your position, keep your options open, and retain the flexibility to pivot if something better comes along.
And as always, I’ll be here to monitor things on your behalf throughout the process—but do make sure to check in with me again around two weeks before you’re due to complete, so we can perform a final check and make sure you’re still on the most competitive deal available.
