What Happens At The End Of A Fixed-Rate Mortgage Term?

If you have a fixed-rate mortgage term coming to an end, you may be wondering what will happen next. Many people try to negotiate a new fixed rate with their provider – but there are other options available to you too.

We investigate what those options are as well as the best current deals on offer and why a broker can prove invaluable when your deal is coming to an end.

What happens when your fixed-rate mortgage term ends?

When your term ends, the agreed rate you were paying moves to your lender’s standard variable rate, or SVR. The SVR is often higher than what your fixed rate would have been so your monthly mortgage payments will most likely increase at this point.

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.

Do you have to remortgage after the fixed-term deal ends?

There is no mandatory requirement for you to remortgage and neither do you 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.

Paying off your mortgage at the end of your deal 

Once your existing deal comes to an end you’re free to make any decision regarding your mortgage without fear of incurring any early exit penalties. 

If you want to remortgage with another lender then they will take care of the transfer of 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 to pay as your existing deal has now finished. 

You will need to notify your mortgage lender of this intention and follow their guidelines for repaying the balance. Once complete they will release the property deeds to you (this is standard practice for lenders to hold the deeds whilst they have a financial interest in a property).

Can you pay it off before your deal ends? 

You can but your lender is likely to request an early repayment charge with potentially an extra fee to close your account and remove their charge from the property. 

The total fees will usually depend on how long is left on the fixed-rate period, typically they can be anywhere between 1%-5% of the outstanding balance.

Even though you are effectively paying back the money you have borrowed, 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 be saving in interest payments by clearing your debt straight away.

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 that can help you.

Which lenders offer the best fixed-rate mortgages?

Take a look at our rates table below to get an idea of what kind of fixed-rate deals mortgage lenders are currently offering.

The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time.

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. You need to consider 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 coming to an end). 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 renegotiate a new fixed-rate term immediately.

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.

General good practice is to start looking at the market – or better still speak to a broker – 6 months or so before your fixed rate term ends to give yourself plenty of time to see what’s available.

Do existing customers get better deals?

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 take the preferential rates you have been offered into account, while also considering the rest of the market. Their knowledge may help you find a better deal for leaving your provider.