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A mortgage broker is offering me a 2 year fixed deal. I raised the issue that, supposing I became unemployed 2 years from now, could I be stuck on the SVR when the fixed term expires, due to being unable to pass any income test for a new mortgage?

His response was

“No that would not happen as you would simply complete a rate switch application with the current lender. There is no cost for this and its literally done in 7 days [ no income proof, valuation or credit checks required ]. Current lender will send a mixture of rates to you and some will have a fee and some will not. We would be able to advise at the time which rate to go for and it all depends on the borrowing and balance at that particular time.”

Does that mean that I wouldn't need to declare income at all at the end of a 2 year period? If this is the case why do banks even have a SVR - why don't they just move everyone to the next deal?

  • It sounds like some salesmanship. How much of his promises are actually in writing? What things could still go wrong? – Pete B. Apr 11 '17 at 12:47
  • Well that's copied and pasted from an email = in writing. Only catch I can think of is he says "no income proof" rather than "your income doesn't matter"; I'd rather not claim income I don't have even if proof isn't asked for... – Sideshow Bob Apr 11 '17 at 13:26
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    However, is this in your loan contract or is it current policy with the bank? The later can change dramatically. – Pete B. Apr 11 '17 at 13:30
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    The broker is telling you half of the truth. If staying with the same mortgage provider you will not need to show your income proof and all. But if you decide to change your mortgage provider then yes you will need all the proof. I changed deals with my mortgage provider and they asked for nothing. But if you wanted to borrow more on your mortgage, then you might need to show proof even if staying with the same provider. – DumbCoder Apr 11 '17 at 14:38
  • If it turns out not to be true 2 years down the line, does it mean I have been mis-sold the mortgage and thus am eligible for compensation? – Sideshow Bob Apr 11 '17 at 17:54
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As is usual for a lot of questions of this sort, the final arbiter of what you can do with a mortgage is the mortgage provider. If the terms of the mortgage or the bank's normal policies permit a rate switch application with no income check, then fine. But you should check this with the bank before agreeing to anything.

As Pete B mentions in a comment above, if this is a matter of bank policy, it could change in the future.

why do banks even have a SVR - why don't they just move everyone to the next deal

A cynical response would be that banks prefer customers to pay more than they need to. In other words, if you want the best deal, you need to do apply for it yourself; don't expect the bank to volunteer the information.

Of course, not all financial institutions behave like this; but with something as important as a mortgage, it never hurts to keep an eye out for a good deal anyway.

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I believe it is a sensible thing to look into and that this may depend on the lender.

While the source (Telegraph) is not my favorite (by far), over the last 2 years there have been reports of one UK lender in particular letting people stay on standard variable rates (SVR) rather than refixing because of new affordability tests, ironically effectively saying: "You cannot afford a cheaper mortgage than you have now"..

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