Mortgage brokers are reporting an uptick in the number of people taking their fixed rate mortgage with them when they move home.
Lenders may allow borrowers to move their mortgage to another property in a process known as ‘porting’.
For those who fixed some time ago, this could allow them to hold on to a low rate for longer, rather than having to fix again at today’s rates of 4 per cent or more.
In summer 2021, for example, some mortgages were being given out on rates of less than 1 per cent.
However, porting will mean going through the rigmarole of further affordability checks – and there are no guarantees.
We look at how porting a mortgage works – and who might be able to do it.
When you port a mortgage, it will be treated like a normal mortgage application. Although your deal remains the same – you will have to once again prove that you meet your lender’s criteria
Why would you port a mortgage?
Roughly 1.6 million people are due to roll off their cheaper fixed rate mortgages this year and more will follow in 2025.
Many of them will be coming off rock-bottom interest rates of 2 per cent or less, and facing the prospect of mortgage rates between 4 and 5 per cent.
Homeowners wishing to move during their fixed rate period will therefore be keen to keep their current interest rate and avoid any early repayment charges, which will have to be paid if the lender refuses to allow the ‘port’.
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Avoid early repayment charges
Most fixed-rate deals come with early repayment charges, which are triggered if someone is forced to refinance early, which can sometimes happen when moving home.
Early repayment charges often range between one and five per cent of the outstanding mortgage amount.
Chris Sykes, technical director at mortgage broker Private Finance says: ‘In the current higher rate environment, more individuals have turned to porting their mortgage.
‘This is because they want to hold onto their historic low mortgage rates.’
David Hollingworth, associate director at L&C Mortgages says his firm has seen a 50 per cent increase in the number of people porting.
‘It does look as though there was an increase in the use of porting last year compared with the previous year,’ he says.
Aside from wanting to keep hold of their low interest rate for as long as possible, there will always be people who find they want or need to move home sooner than expected.
Tests: Where you require additional borrowing to fund your purchase, the lender will need to check the mortgage is still affordable to you based on their standard criteria rules
Downsides of porting a mortgage
While porting has its perks, there are some important considerations to take into account.
First, even if a mortgage is portable, it doesn’t necessarily mean it will be easy to port the current mortgage across to a new property.
There can be a problem if a person’s financial circumstances have changed or if the property being purchased doesn’t fit within their lender’s criteria.
‘Porting is definitely a good feature, but the risk can be that the lender’s criteria can’t be met or that they can’t offer any required additional top-up borrowing,’ Hollingworth adds.
The borrower will have to go through the same kind of checks as if they were taking out a new mortgage with the lender – and the goalposts may have been moved since they took out their original loan.
‘A port triggers a full re-underwrite by a lender and individuals may not be able to access the same borrowing amount,’ says Sykes.
‘It could be a problem if their circumstances have changed, the lender’s criteria has changed, or their outgoings have risen due to the higher cost of living.’
Timings must be right
Another complication is that, in order to avoid any early exit penalties, the sale and purchase will ideally need to be done simultaneously, with no break period between the sale and the completion of the new property.
However, according to Sykes, many lenders will allow a short time frame in between the sale and purchase.
Sykes says: ‘It is possible to avoid paying the penalty charge depending on your lender – but you will have a tight time frame in which to do so.
‘Many lenders will allow you to sell first and then bring your mortgage “back to life” and reclaim the early repayment charge within a 60-to-90-day period.
‘This is a high-risk strategy, as you may not get the early repayment charge back until after completion. The rules also vary from lender to lender.’
While porting is an effective way to save on early repayment charges, it will only work for the right kind of borrower.
There is a chance the property you are buying may not acceptable to your current lender so it would be worth speaking with a broker first
For example, for someone wanting to borrow more to fund their onward purchase, ‘porting’ their mortgage may limit the chances of getting the very best deal on the market.
This is because any additional borrowing would also need to be taken from their existing lender, who may not be offering the most competitive deal.
Not only could this mean someone essentially find themselves dividing their mortgage into two with two separate end dates, but it also means there may be better rates available elsewhere that might outweigh the penalty.
Sykes adds: ‘It is quite easy to become trapped with the same lender that may not be the most competitive if doing additional borrowing on products that then do not line up on the same end date.
‘You may have to have to pay an charge to change product in the future, or you could end up with part of your debt on a lender’s higher standard variable rate at some stage.’
It is also possible to lose the chance to port a mortgage if the case is declined.
There is a chance the property you are buying may not acceptable to your current lender, so it would be worth speaking with a broker first.
Sykes adds: ‘A mortgage broker will be able to pre-predict any potential stumbling blocks along the way, so it is important to get in touch as early as possible.’
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