Changing mortgage at the end of a fixed rate

We took out a fixed-rate mortgage for our home around 3 years ago, and that fixed-rate period is about to come to an end.

If we had done nothing and left the mortgage as it is then it would have transferred automatically from the fixed rate onto the bank’s current variable interest rate, which is higher. We’d have ended up paying about €200 more a month!

Instead we approached Ulster Bank a few months ago to ask them about our options for transferring onto another fixed-rate deal. The process has been somewhat frustrating and slow. The bank seems to obfuscate the process in order to dissuade people from making the effort to move to a better deal.

In order to change our mortgage to another fixed-rate we had to request two things from the bank which were sent out in the post:

  • a list of all current mortgage products, which includes all the fixed and variable rate deals, and a form to select which offer we want to move onto
  • a letter detailing the break-out cost because we are quitting our existing fixed-rate deal a few months early

Moving to another mortgage rate

We received the details from Ulster Bank a few months ago, and when we did our sums there was an obvious advantage for us to change our mortgage to another – cheaper – fixed-rate deal. The break-out fee to get out of our current fixed-rate was less than the savings we could make in a single month by moving.

Unfortunately the Ulster Bank process isn’t communicated well in the correspondence sent out to customers. They don’t actually mention how the break-out fee is to be paid, so we assumed that they would just take it from our current account, or add it to our mortgage balance. But no. You have to phone them (within a set period of time of receiving the break-out offer) and pay the fee over the phone. Only then will they move you onto the new interest rate.

And because we didn’t know we were meant to call the bank to pay the break-out fee, they ignored our written instructions, and didn’t move us to the new cheaper interest rate.

I would have thought that a simple phone call from Ulster Bank saying “We’ve received your application to move to a new fixed rate. Would you like to pay the break-out fee now?” might have moved things along. But instead they chose to do nothing, and our form requesting the reduced interest rate was ignored for more than 2 months – losing us hundreds of euros in potential savings in the process!

When we recently chased it up we were told we’d have to start the process all over again as our break-out fee would have to be recalculated. So we had to wait another week for the paperwork to come, phone Ulster Bank and pay the break-out fee, and then return our form for the new mortgage deal (which they say takes them 5-10 business days to process!).

Was it worth the hassle?

It’s definitely worth switching to a new fixed-rate deal if your current one is about to run out. The interest rates today are lower than they were a few years ago, and you could end up saving a lot on your monthly payments.

All the fixed-rate deals are cheaper than the variable interest rate, so unless you’re planning to pay off your mortgage early (which can incur penalties if you’re in a fixed-rate deal) it’s definitely worth exploring.

Under new regulations the banks are meant to make more of an effort to reach out to customers nearing the end of fixed-rate deals to inform them of their options – but I suspect banks are only going to do the bare minimum on this, as it’s not in their interest to promote their cheapest mortgages to existing customers.

Posted by Richard

Richard has been blogging since 2000 about technology, cycling, singing, and life in general. Follow him on Twitter.

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