Remortgaging From First Direct

Why Do First Direct Customers Consider Remortgaging?

First Direct enjoys an unusually loyal customer base, but even satisfied customers have good reasons to explore remortgage options:

• SVR still costs more than a fixed deal — While First Direct's SVR of around 6.49% is lower than many competitors, it is still meaningfully higher than the best fixed rate deals available. On a £200,000 mortgage, the difference could still amount to several hundred pounds per month.
• No branches — First Direct operates entirely online and by telephone, with no physical branches. While many customers value this streamlined approach, some borrowers prefer the option of face-to-face advice when making major financial decisions like remortgaging.
• HSBC Group product limitations — As part of HSBC Group, First Direct's mortgage products are ultimately underwritten by HSBC UK. This means the lending criteria and product range are closely aligned with HSBC's, which may not suit all borrowers. Customers who do not meet HSBC's standard criteria may find more flexible options with other lenders.
• Life changes — Changes in personal circumstances, such as a new job, a growing family, or a desire to release equity for home improvements, can make remortgaging a practical necessity regardless of how satisfied you are with your current lender.
• Rate shopping is prudent — Even if you ultimately decide to stay with First Direct through a product transfer, going through the exercise of comparing market rates ensures you are making an informed decision rather than simply defaulting to your existing lender.

First Direct SVR and How It Affects Your Payments

First Direct's standard variable rate is currently around 6.49%, which is the same rate charged by its parent company HSBC. While this is notably lower than the SVRs of many high street banks, which often range from 7.25% to 7.75%, it still represents a premium over the best available mortgage deals.

Here is a comparison using a £250,000 repayment mortgage over 25 years:

• At 6.49% (First Direct SVR) — monthly repayments of approximately £1,688
• At 4.50% (competitive fixed rate) — monthly repayments of approximately £1,389
• Potential monthly saving — around £299 per month, or approximately £3,590 per year

The fact that First Direct's SVR is lower than average is worth bearing in mind when calculating whether the cost and effort of remortgaging is justified. For some borrowers, particularly those with smaller mortgages or shorter remaining terms, the absolute savings from switching may be relatively modest once fees are factored in. A broker can help you calculate the precise figures for your situation.

It is also worth noting that First Direct often offers competitive product transfer rates to existing customers. Before looking externally, check what First Direct can offer you as a renewal deal, and use this as a benchmark against which to compare the wider market.

How to Remortgage Away From First Direct

The process of remortgaging from First Direct is straightforward, though it is worth noting a few specifics about dealing with a branchless bank:

• Review your mortgage details — Log into First Direct's online banking or call their dedicated mortgage line to confirm your outstanding balance, current rate, early repayment charges, and deal end date. First Direct's telephone service is available 24 hours a day, seven days a week, which makes obtaining this information convenient.
• Assess your property value and LTV — Get an estimate of your property's current market value. The higher your equity, the better the rates you will have access to. Online valuation tools provide a starting point, but a local estate agent's appraisal may be more accurate.
• Compare market rates — Use a whole-of-market broker to compare deals from across the entire lending market. Be sure to include First Direct's own product transfer rates in the comparison, as they are sometimes competitive with external offers.
• Submit your application — If you decide to switch, your new lender will carry out affordability checks, credit searches, and a property valuation. First Direct's straightforward online mortgage statements and clear documentation make it easy to provide the information your new lender needs.
• Complete the switch — A solicitor handles the legal transfer, redeeming your First Direct mortgage and setting up the new lender's charge over your property. The process typically takes four to eight weeks.

First Direct's efficient administration means that redemption statements and other documentation are usually processed quickly, which can help speed up the overall remortgage timeline.

What to Consider Before Leaving First Direct

Before deciding to remortgage away from First Direct, weigh up the following considerations:

• Customer service quality — First Direct consistently ranks as one of the UK's top-rated banks for customer service. If service quality is a priority for you, consider whether your new lender can match this standard. Some borrowers find that the lower rate from a different lender comes with a notably inferior customer experience.
• Early repayment charges — First Direct applies ERCs during the initial deal period, just like other lenders. Check your mortgage offer for the specific percentages, which typically decrease each year.
• Product transfer rates — First Direct often offers competitive renewal rates to existing customers. A product transfer involves less paperwork, no legal fees, and no property valuation. Compare the product transfer rate carefully against external options, factoring in any arrangement fees the external deal may charge.
• HSBC Group benefits — As part of HSBC Group, First Direct customers sometimes benefit from cross-group offers or preferential rates on other HSBC products. Check whether any such benefits are linked to your mortgage.
• Offset mortgage considerations — If you hold a First Direct offset mortgage, consider whether the offset structure is providing genuine value based on your savings balances. If your savings are modest, a standard fixed rate at a lower rate may be more cost-effective.

When a Broker Adds Value for First Direct Customers

First Direct customers sometimes question whether a broker is necessary, given the bank's excellent direct service. However, a broker can still add substantial value:

• Objective rate comparison — First Direct's own product transfer rates are sometimes very competitive. A broker provides an unbiased comparison against the wider market, confirming whether First Direct's offer is genuinely the best or whether switching lender would save you more.
• Access to broker-exclusive deals — Many lenders offer rates through brokers that are not available to direct applicants. These intermediary-only products can sometimes undercut even First Direct's competitive renewal rates.
• HSBC Group alternative — If First Direct's product transfer rates are not the best, a broker can also check HSBC's direct rates, as well as deals from the wider HSBC Group. In some cases, HSBC may offer different products or rates to what is available through First Direct.
• Total cost analysis — A broker calculates the total cost of each option, including arrangement fees, valuation fees, and any cashback, over the full deal period. This prevents you from being drawn to a headline rate that turns out to be more expensive once fees are included.
• Complex income situations — If your income structure is complex, for example if you receive bonuses, commission, rental income, or are self-employed, a broker can identify which lenders are most likely to use your full income in their affordability calculations.

As with most remortgage situations, broker services are free to the borrower, with the commission paid by the new lender. Even if you end up staying with First Direct, the comparison exercise costs you nothing and ensures you have made an informed decision.