If your fixed-rate mortgage deal is ending shortly, you’re not alone. Figures reported by the Guardian show that more than 2.4 million fixed-rate homeowner deals are set to expire between mid-2023 and the end of 2024.
So, when the time comes, you’ll need to think carefully about how to get the best new deal once your existing fixed rate expires.
With interest rates having risen 14 times since December 2021, shopping around for the right deal for you has never been more important. So, read on for five practical tips if your fixed-rate mortgage deal is ending.
1. Start early
Once your fixed-rate deal ends, your mortgage will usually revert to your lender’s standard variable rate (SVR). This is typically much higher than other rates available on the market – indeed, in October 2023, the Independent reported that the average SVR in the UK had reached 8.18%.
To avoid making repayments at this higher rate, it can pay to start early.
Many lenders will honour a mortgage offer for somewhere between three and six months, ensuring that your mortgage can seamlessly switch to a new deal immediately after your existing rate ends.
So, find out exactly when your current deal expires and start searching for alternatives at least three months in advance.
2. Prepare for a rise in your repayments
There’s no getting away from it – if you took your existing fixed-rate deal out over the last few years, your repayments are highly likely to rise when you switch onto a new product.
Moneyfacts reports that, at the start of December 2021, the average fixed rate for a two-year mortgage stood at 2.34%. As of December 2023, this rate now sits at 5.98%.
Using the Altura mortgage calculator, the repayments on a £500,000 capital and interest mortgage over a 20-year term would have been £2,610 at the 2021 average rate of 2.34%, and are now £3,576 at the December 2023 average rate – a rise of £966 a month.
The rise in your repayments will depend on a range of factors, including the rate you’re currently paying, the amount you owe, and the term left on your mortgage.
However, you should budget for an increase. It also underlines the need to start shopping around early so you can set your expectations for a future rise.
3. Think about what type of deal you’d like this time
When the time comes to switch your deal, you’ll need to think about what sort of deal you’d like this time.
If you want the certainty of knowing what your repayments will be, then another fixed rate may be your preferred option.
However, with many analysts predicting that interest rates could fall in 2024 and beyond, taking out a variable-rate deal could see you benefit from any rate cuts over the next couple of years.
Remember also that fixed rates tend to come with early repayment charges (ERCs) if you repay some or all of the mortgage during the fixed-rate period. So, if you plan to move home or pay a lump sum off your mortgage in the next year or two, a fixed rate may not be the right choice for you.
A professional can help you to understand the different options.
4. Shop around
Considering the cost of the average two-year fixed-rate mortgage has more than doubled in the last two years, shopping around can help you save money.
While the cost of borrowing has risen since 2021, Moneyfacts reports that the market is showing some signs of improvement. For example, the average cost of a two-year fixed-rate mortgage has fallen by 0.31% since the start of November 2023.
It’s likely that, as you approach the end of your current deal, your existing lender will offer a “loyalty” product to encourage you to stay with them. However, think carefully before doing this – you have read before why simply accepting a deal from your existing lender may not be the best option.
Think of it like your car or home insurance. Yes, it might be easier to simply renew with your current provider, but how often has even a quick comparison search revealed that you could save a significant amount of money on your premiums?
It’s the same with your mortgage. Finding a lower interest rate with a new lender can save you a significant sum – often thousands of pounds – over the lifetime of your deal. And, the switching process can be much easier than you think, especially if you work with a professional who can help to manage the process. This brings us to…
5. Work with a professional
In November 2023, Moneyfacts reported that the number of mortgage deals available on the market had reached its highest level since 2008.
With more than 5,600 deals available from dozens of lenders, finding the most appropriate deal for your needs can be complex. So, working with a professional can help you to navigate these choices.
We have access to thousands of deals, some of which are not available directly to the public. So, if your fixed-rate deal is coming to an end, get in touch with us.
We’ll give you impartial, honest advice and help you to find the right mortgage deal – whatever your circumstances.
To find out more, email [email protected] or call us on +44 (0) 20 3411 0079.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
