What Happens if a Lender Changes Rates (Downwards) Before My Mortgage Completes?
Written on 9 March 2025 by
Mortgage Rate Volatility: What You Need to Know
The mortgage market has experienced significant fluctuations in recent years, and while 2024 has brought some stability, rate changes continue to impact borrowers. With inflation cooling and the Bank of England maintaining a cautious stance, many are optimistic that interest rates will gradually decline over the year. However, the extent of the decrease remains uncertain.
In early 2024, the average mortgage rates have fallen slightly compared to the highs of 2023:
- 5-year fixed mortgage rates currently average 4.75%, down from 5.50% at the start of the year.
- 2-year fixed mortgage rates have dropped to 5.10%, compared to 5.75% in late 2023.
These downward trends are encouraging for those currently securing a mortgage, but what happens if your lender reduces rates before your mortgage completes?
How Lenders Handle Rate Reductions Before Completion
If you've applied for a mortgage and the lender reduces rates before your completion date, you may have options to benefit from the new lower rate. Here’s how different lenders may handle the situation:
- Automatic rate adjustment – some lenders will automatically apply the new lower rate to your mortgage offer if it hasn't yet completed
- Rate switch before completion – many lenders allow applicants to switch to the lower rate, but this may require issuing a new offer, which could delay completion
- Full new application required – in some cases, changing to a lower rate may mean submitting a brand-new application, which could involve a fresh credit check and updated affordability assessment
It’s important to check with your mortgage broker or lender about their policy on rate changes before completion.
Should You Change Your Rate If It Drops?
If your lender offers a lower rate before completion, switching can often result in savings. However, there are considerations to keep in mind:
- Processing delays - if switching requires a new application, it could delay your completion timeline
- Credit score impact - a new application might trigger another hard credit check
- Changes in financial circumstances - lenders reassess your finances when issuing a new mortgage offer, so any changes (e.g., job switch, additional debts) could impact approval
Options If You Locked in a Higher Fixed Rate
If you secured a fixed-rate mortgage several months ago at a higher rate, you still have options:
- Stick with your current lender - some lenders allow you to switch to their lower rate before completion
- Explore the market again - with rates declining, it may be worth withdrawing your current application and applying with another lender
- Consider a product transfer - if your mortgage is with an existing lender, switching to a new product may be more cost-effective than a full remortgage
The Value of Using a Mortgage Broker
With the market constantly evolving, working with a whole-of-market mortgage broker can be invaluable. Here’s why:
1. Saves You Time
Comparing rates across multiple lenders can be overwhelming, especially when rates change frequently. Brokers have access to the latest deals and can quickly find the best option for your needs.
2. Provides Up-to-Date Market Insights
Brokers receive advance notifications on rate changes, allowing them to act quickly to secure the best deals.
3. Saves You Money
A broker evaluates not just the interest rate but also associated costs like lender fees, valuation fees, and legal fees to ensure you get the most cost-effective mortgage.
4. Access to Exclusive Products
Some lenders offer special deals exclusively through brokers, meaning you could secure a better rate than going directly to a bank.
5. Expert Guidance
With so much media speculation around mortgage rates, having expert guidance ensures you make informed decisions rather than reacting to headlines.
What’s Next?
If you're in the process of getting a mortgage and want to explore your options following a rate change, reach out to a mortgage expert. A broker can review your case and help determine the best course of action.
Get in touch with one of our experts at 0808 303 5528 to discuss your mortgage options today.
Category:Nicholas Mendes
