Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in and we’ll get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at money@inews.co.uk.
Question: I had a mortgage fixed for five years with a lender that specialises in offering loans to people with adverse credit, but it transferred the loan with no notice, to a company that does not lend mortgages. I am now stuck on an 8.7 per cent variable rate. Is this allowed? I now seem to be stuck with a lender that doesn’t offer new mortgages and I can only hope interest rates go down or try and find another lender?
Answer: Learning that your mortgage has been transferred to another company can be both surprising and frustrating, especially if the new servicer doesn’t offer the products or solutions you need. Many borrowers wonder why this happens, whether it’s allowed, and what their options are. Here’s what you need to know.
Mortgage transfers are a common practice among financial institutions. Lenders often sell portfolios of mortgages to other entities for strategic reasons like freeing up capital or focusing on other areas of business.
The lender your loan has been sold to is not a traditional lender but a servicing company that manages transferred loans. While this transfer may feel unsettling, it is entirely legal and aligns with the terms of most mortgage agreements, which typically allow such transfers without requiring borrower consent.
A key reassurance is that your rights and original mortgage terms remain unchanged. Your new lender is bound by the conditions in your contract, including the interest rate and repayment schedule. However, its role as a servicer comes with limitations — it does not offer new mortgage products, such as fixed-rate options, leaving you with their current variable rate of 8.7 per cent.
This lack of flexibility can feel restrictive, especially in a high-interest-rate environment.
It’s natural to feel a loss of control, particularly if the transfer leaves you without access to options that might better suit your needs.
For homeowners on a high variable rate with no alternatives, there are two main paths forward: waiting for interest rates to drop or exploring a remortgage with a new lender. Waiting for rates to decline is unpredictable and may not be the most prudent strategy especially as there’s no guarantee they’ll decrease significantly soon.
A proactive solution is to remortgage with another lender. This allows you to secure a more favourable rate and ease any financial pressure.
While navigating this process can seem daunting, especially after a mortgage transfer, consulting a mortgage broker can make a significant difference.
Brokers offer access to a broad range of lenders, including options that may not be available directly. They simplify the process by managing paperwork and negotiations, and their expertise can improve your chances of securing a better deal tailored to your situation.
If your lender’s lack of options leaves you feeling stuck, remember that you still have choices. Start by confirming your current mortgage terms and addressing any immediate concerns.
At the same time, take proactive steps to explore remortgaging. A broker can guide you through the process, helping you regain control and potentially save money.