What happens when your fixed-term mortgage deal comes to an end?
Key Takeaways
- When a fixed-rate mortgage deal expires, your lender will usually move you onto its Standard Variable Rate (SVR) unless you arrange a new deal, potentially changing your monthly repayments.
- Homeowners have three main options: remain on their lender’s SVR, switch to a new deal with their existing lender through a product transfer, or remortgage with a different lender.
- Staying on an SVR offers flexibility, particularly if you plan to move soon, but it may be more expensive than other available mortgage deals.
- A product transfer can involve less paperwork and fewer fees, while remortgaging may offer access to more competitive rates but can involve affordability checks, valuation costs and legal work.
- Start reviewing your options several months before your fixed rate expires, compare the overall costs of available deals and consider seeking independent mortgage advice to find a suitable option.
If your fixed-rate mortgage deal is coming to an end, now is the time to start thinking about your next steps. Whether you want to secure a new fixed-rate mortgage, switch lenders or keep your options open, understanding the choices available can help you make an informed decision about your finances.
With the Bank of England’s next interest rate announcement due in November, borrowers should also keep an eye on the wider mortgage market. If interest rates rise, those coming to the end of their fixed-term deal could face higher monthly repayments when arranging a new mortgage.
What happens when a fixed-rate mortgage ends?
When your fixed-rate mortgage term expires, your lender will usually move you onto its Standard Variable Rate (SVR), unless you have arranged another deal.
Unlike a fixed mortgage rate, an SVR can change over time, meaning your monthly mortgage repayments could increase or decrease. Depending on your lender’s rate and the deal you previously had, this could result in a significant change to your household budget.
Rather than automatically accepting the SVR, it is worth exploring your mortgage options before your current deal expires.
What are your options when your fixed mortgage deal ends?
There are three main options to consider when your fixed-term mortgage comes to an end.
1. Remain on your lender’s Standard Variable Rate (SVR)
You can choose to stay on your lender’s SVR without taking out a new mortgage deal. This offers flexibility, particularly if you are planning to move home soon and do not want to commit to another fixed-rate mortgage.
Remaining on an SVR may also help you avoid early repayment charges associated with leaving a fixed-rate deal before its agreed end date. These charges can typically range from 1% to 5% of your outstanding mortgage balance, depending on your mortgage terms.
However, SVRs can be more expensive than other available mortgage deals, so it is important to weigh up the potential costs.
2. Choose a product transfer with your existing lender
A product transfer involves switching to a new mortgage deal with your current lender. This can be a straightforward option, often involving less paperwork than remortgaging and potentially avoiding legal or valuation fees.
Your existing lender may offer a range of fixed-rate or variable-rate products, allowing you to choose a deal that suits your circumstances.
While a product transfer can be convenient, it is worth comparing the rates and terms available elsewhere to ensure you are not missing out on a more suitable mortgage.
3. Remortgage with a new lender
Remortgaging involves moving your existing mortgage to a different lender. This could give you access to more competitive mortgage rates or products that better suit your current financial circumstances.
However, remortgaging can involve additional steps, including affordability checks, a property valuation and legal work. You should also check whether any fees apply and consider the overall cost of the new deal, rather than focusing solely on the interest rate.
When should you start looking for a new mortgage deal?
It is sensible to start reviewing your mortgage options several months before your current fixed-rate deal expires. This gives you time to compare products, understand any fees and prepare for a potential change in monthly repayments.
Interest rates and mortgage products can change, so securing a deal early may provide greater certainty. However, the right timing will depend on your lender’s terms and the options available to you.
Most importantly, it is recommended that you always seek independent financial advice before making a decision. A mortgage adviser can help you understand the options available and assess which approach best suits your circumstances.
How can ESPC Mortgages help?
If your fixed-term mortgage deal is coming to an end, ESPC Mortgages can help you explore your options. The team provides independent mortgage advice, helping homeowners compare available products, understand the remortgaging process and find a mortgage solution suited to their needs.
Whether you are considering a product transfer or looking to switch lenders, the team can guide you through the process and help take some of the stress out of finding your next deal.
Find out more about ESPC Mortgages and arrange a free, no-obligation initial consultation.
The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). The Financial Conduct Authority does not regulate Buy to Let Mortgages. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.
THE INFORMATION CONTAINED WITHIN THIS ARTICLE WAS ACCURATE AT THE DATE OF PUBLICATION AND IS SUBJECT TO CHANGE. THERE CAN BE NO GUARANTEE THE INFORMATION WILL CONTINUE TO BE ACCURATE IN THE FUTURE.