What is remortgaging?
A basic guide to remortgaging.
Image: Rob Casey - Getty
Remortgaging is when a borrower who already has a home loan with one lender switches it to another one.
The practice was relatively rare until 30 years ago, when lenders mostly offered only basic variants of variable rates.
The assumption was that borrowers would simply stick with their existing mortgage for its full duration.
But in the early 1990s, as property prices fell and the market was in the doldrums, mortgages became much more competitive as lenders realised that the only way to win new business was to battle for each other’s existing borrowers.
Thereafter, lenders also found themselves competing for business among new homebuyers, offering ever more sophisticated deals.
Initially, they tried to keep their borrowers by tying them to heavy redemption penalties, sometimes stretching for years after the special deals that first attracted them came to an end.
Today that practice is largely non-existent, with most penalties applying only for the lifetime of the deal itself.
Meanwhile, some 40% or more of all new loans in the UK each month are remortgages.
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