What Happens At The End Of A Fixed-Rate Mortgage Term?
It is common for customers to miss the deadline and end up on their lender’s standard variable rate. This simple mistake can cost you hundreds of pounds more each month. Our team of eight advisors is here to help you act in time and avoid overpaying on your monthly mortgage payments. We are confident we can get your mortgage approved and find you the best deal. If we cannot and another broker does, we will give you £100.*
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Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
Quick Summary
When your fixed rate comes to an end, you’ll almost always automatically move onto your lender’s Standard Variable Rate (SVR), which is usually higher. At that point, you can switch to a new deal with your current lender (or stay on the SVR), or remortgage to a new lender.
Some fixed-rate deals step onto a different type of rate when they expire, not the SVR, such as a lifetime or term-limited tracker, or on occasion, a different fixed rate.
If you are borrowing more money, you don’t necessarily have to leave the lender you’re with to do it. You can remortgage for more with them, or with a new lender, or a mix of both – keeping the main mortgage where it is and taking a second mortgage with a new lender.
Whichever you choose, it’s best to speak to a remortgage expert who will give you the right advice and make sure you get the best deal you can get.
Also, FYI – It’s a good idea to start looking at your options 3 to 6 months before your deal ends to avoid a sudden jump in your interest rate, as the process can take a few weeks, but you can lock in a deal today.
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When your fixed-rate mortgage ends, you’re automatically placed on the lender’s standard variable rate (SVR). SVRs usually have a higher interest rate than a fixed-rate mortgage. To avoid potentially higher costs, consider remortgaging, a product transfer, or transitioning to a tracker mortgage.
You have the option to change your mortgage at this juncture without incurring penalties. You can move providers, change your mortgage type, remortgage to a new fixed rate, or simply stay on the SVR.
There is no mandatory requirement to remortgage, and you do not have to do this with your current provider only. If you do decide to remortgage, you can lock in a new fixed rate, either with your current provider or a new one. Many people go down this route as they like to secure the lowest interest rates available and then have a set mortgage repayment each month.
It can be tempting to stay with your current mortgage provider as many lenders offer existing customers preferential rates. However, that limits your options just to that one lender. If you use a broker, they will consider the preferential rates you have been offered while also considering the rest of the market. Their knowledge may help you find a better deal for leaving your provider.
Fixed-rate mortgages are typically subject to early repayment charges, often ending when your fixed-rate term ends. So, if you then move to your lender’s standard variable rate, you can usually pay off a chunk of your mortgage without incurring early repayment charges.
Many fixed-rate mortgages also have an overpayment facility, usually 10% of the initial mortgage amount, which you can pay annually without ERCs. Always check the terms and conditions of your agreement first, however.
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Once your existing deal ends, you’re free to make any decision regarding your mortgage without fear of incurring early exit penalties.
If you want to remortgage with another lender, they will take care of transferring your mortgage from your existing provider. All you will need to do is complete the new remortgage application along with all the accompanying documentary evidence—proof of income, copies of bank statements, proof of address/ID, etc.
If you have sufficient funds to pay off your mortgage balance in full, you can do that, too. Again, there will be no early repayment charges as your existing deal has finished.
You will need to notify your mortgage lender of this intention and follow their guidelines for repaying the balance. Once you have completed this, they will release the property deeds to you (it is standard practice for lenders to hold the deeds while they have a financial interest in a property).
You can, but your lender is likely to request an early repayment charge, which could be an extra fee to close your account and remove their charge from the property.
The total fees will usually depend on how long the fixed-rate period is left; typically, they can be anywhere between 1% and 5% of the outstanding balance.
Even though you effectively repay the borrowed money, it is unusual to find a fixed-rate mortgage with no early repayment charges or exit fees.
The amount it will cost you to pay off your mortgage during a fixed rate should be offset against the amount you’ll save in interest payments by clearing your debt immediately.
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How can you compare the best current fixed-rate mortgage deals?
While many comparison websites claim they can help you compare current deals, your best bet is to approach a mortgage broker.
Brokers can prove invaluable when it comes to securing the best mortgage for you thanks to their experience and depth of knowledge of the entire mortgage market. They will compare the best fixed-rate deals with different terms from different lenders to see which are best for you. They’ll also have access to deals not readily available to the general public, either online or on the high street.
Crucially, they’ll also consider all other types of mortgage. While fixed-rate mortgages are popular for good reasons (locking in a rate, for example), that doesn’t necessarily mean they’re always the best for everyone. Brokers will factor in all variables from your specific situation to recommend a product that is most appropriate for you. For instance, you may need more flexibility than the terms of a fixed-rate product or market conditions may make a tracker mortgage more attractive.
Using a broker can, therefore, help you save money, not to mention the stress involved when comparing current deals on your own. Contact us today so we can put you in touch with a broker who can help.
Which lenders offer the best fixed-rate mortgages?
Take a look at our rates table below to get an idea of what fixed-rate deals mortgage lenders are currently offering.
| Lender | Initial Rate | Initial Term | Monthly Payment |
|---|---|---|---|
|
3.98% | 2 years | £1,032 |
|
|
4.03% | 3 years | £1,038 |
|
4.09% | 2 years | £1,044 |
|
|
4.10% | 5 years | £1,045 |
|
4.11% | 5 years | £1,047 |
Looking for more rates and deals?
Use our comparison tool or speak to an advisor to find the perfect mortgage for you.
Based on: £280,000 property value, £84,000 deposit, Remortgage, 25 year mortgage term.
The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. The best way to keep track of the rates available at any given time is to speak to a mortgage broker.
Remember, the best deal for one individual is not automatically the best for you. For instance, you may be happy to take on a higher rate if it means it is fixed for longer, whereas someone else will want the lowest rate possible. It would be best if you considered all the variables that affect the deal in relation to your circumstances with a broker.
When can you renegotiate your new mortgage terms?
The time frame in which you can renegotiate without ERCs or penalties will be outlined in your terms and conditions (usually within 6 months of your existing term ending). This will be the best time to renegotiate your new mortgage with your existing lender. If you have already moved to your lender’s SVR, you can immediately renegotiate a new fixed-rate term.
However, you can still try to remortgage earlier, though you will likely be subject to exit fees. You need to factor into your decision whether the fees are worth paying. The long-term savings you make with a better fixed rate may make it financially worthwhile to pay those fees. A broker will be best placed to advise you on this. Taking into account the rates of products you are eligible for versus your early repayment charges.
A general good practice is to start looking at the market, or better yet, speak to a broker, six months or so before your fixed rate term ends to give yourself plenty of time to see what’s available.
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Speak to a broker about your fixed-rate deal
When your fixed-rate deal is coming to an end, you have far more options available to you than simply renegotiating a new deal with your current provider. However, the wealth of choices can make it difficult to find the best option for you. One of our brokers can help you thanks to their experience and depth of knowledge.
Our free, no-obligation service will connect you with the best broker for your needs. Call us on 0330 818 7026 or enquire with us today so we can connect you with a specialist.
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Pete Mugleston
CeMAP Mortgage Advisor, MD
Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!
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