Halifax and Lloyds make big change to mortgages following Santander and Nationwide – do you need to act?
HALIFAX and Lloyds have made a big change to mortgages following similar adjustments by Santander and Nationwide.
The lenders have cut the length of time a borrower can lock in a new fixed-rate before their current deal expires.
It means homeowners coming off fixed mortgage deals will now need to act with more urgency.
The length of time that a borrower has to secure a new fixed deal is decreasing from six months from the end of their current mortgage to four months.
A fixed-rate mortgage means your monthly payments will stay the same for the length of the agreed term.
The change will come into effect on October 1 for new customers and those whose mortgage matures on or after February 1, 2025.
For those whose product matures before January, 31, 2025, it’s still possible to secure a new deal up to six months in advance of their current deal ending.
A spokesperson for Lloyds Banking Group, which owns both banks, said: “Our approach offers homeowners both the certainty of selecting a new mortgage rate up to four months in advance, and the flexibility of switching to a better rate that might become available too.
“And, where rates are going down – customers in the final three months can choose to switch immediately without penalty.”
It comes after Nationwide and Santander made the same change in June.
While other lenders, such as Barclays, HSBC, NatWest and Virgin Money still give you six months to lock in a new deal.
Around 700,000 loans are up for renewal in the second half of this year, says UK Finance, and borrowers face huge bill increases.
The average two-year fix currently stands at 5.56%, according to Moneyfacts.
While the average five-year fixed rate stands at 5.2%.
This contrasts dramatically with typical rates for a two-year fixed deal in December 2021, which once stood at 2.34%.
At the same time, homeowners could bag a five-year fixed rate at just 2.64%.
Repossessions have also ballooned, with 980 homeowner mortgaged properties repossessed in the second quarter of 2024.
This marked an 8% increase compared with the previous quarter and a 31% rise compared with the same quarter in 2023.
This shows the pressure on households as deals come to an end.
But there are signs that the pressure is easing.
HSBC, NatWest, and Barclays have slashed their mortgage rates as lenders continue to battle for customers.
NatWest has led the way, decreasing its purchase deals from 3.89% to 3.77%, with a product fee of £1,495.
Meanwhile, Barclays has reduced its two-year fixed rate mortgage with an 85% LTV and a £999 product fee from 4.95% to 4.75%.
A five-year fixed rate with a 75% LTV and a £899 product fee has been reduced from 4.03% to 3.95%.
HSBC is also cutting rates across its five-year and two-year fixed deals, although the specific details are yet to be revealed.
The Bank of England‘s (BoE) Monetary Policy Committee cut the base rate from 5.25% to 5% at the beginning of August.
The next time time the BoE will meet is Thursday, September 19.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “The BoE is likely to hold rates this month.
“A close split is anticipated as the committee closely monitors the effects of the previous cut.
“With inflation expected to remain slightly above their comfort level, the committee will likely adopt a wait-and-see approach, recognising that the impact of the previous reduction on inflation will not be immediate.
“While rates are projected to fall later this year to around 4.75%, a more significant reduction to 4% may not occur until 2025.”
Why have Lloyds and Halifax changed their rules?
The government introduced a new Mortgage Charter in July 2023 to help struggling households.
Lenders who agreed to rules in the Charter were encouraged to raise the amount of time households were given to lock into a new fixed deal to six months.
This was to ensure households had the flexibility to choose a new deal ahead of time and before rates were predicted to shoot up even further.
However, this rule wasn’t compulsory and some lenders already had the policy in place.
Lloyds and Halifax increase the period customers could secure a deal from three to six months in November 2022 – eight months before the mortgage charter.
The group said it has switched to four months because of consumer behaviour and changes in the mortgage markets.
What does it mean for customers?
Locking in to a new fix deal six months ahead gives homeowners plenty of time to do their research, find the right deal, and plan a budget.
However, if you’re a Lloyds, Halifax, Nationwide or Santander customer who’s six months away from remortgaging, you’ll now have to wait another two months before you can lock in a deal with your existing provider.
If you’re looking to lock in a new rate six months in advance, you’ll need to get a quote from another lender.
Although, anyone who has a deal ending soon should speak to a broker to assess their options.
If your mortgage is due to expire in less than four months, the recent changes won’t make your situation any worse or better and you’ll be able to lock in a new deal from this point on.
Either way, borrowers can still check if they can still ditch their deal penalty-free and switch to another provider in case interest rates drop.
In effect, sticking with the same lender becomes an insurance policy for the borrower, as long as they can get out of it.
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