If your mortgage deal is coming to an end in the next few months, you’re not alone. Official figures from the Office for National Statistics (ONS) show that more than 1.4 million households in the UK are facing the prospect of higher repayments when they renew their fixed-rate mortgages in 2023.
Typically, when your mortgage deal is ending, you have three options:
- Do nothing, and your mortgage will usually revert to your lender’s “standard variable rate” (SVR). This will likely see your repayments rise sharply.
- Take a deal that your existing lender offers you. This is typically known as a “product transfer”.
- Shop around and switch your mortgage to a new lender – usually called a “remortgage”.
In recent weeks, FTAdviser has reported a rise in the popularity of option 2 – borrowers accepting a deal from their existing lender.
While this may seem like a low-stress option, there are three crucial reasons you should speak to a mortgage expert before simply choosing the deal your current lender offers to you. Read on to find out what they are.
1. You want to be sure it’s the best deal available
In an environment where interest rates are rising – the base rate rose 12 times between December 2021 and May 2023 – every penny counts.
If your mortgage deal is coming to an end, it’s likely you have benefited from a very low interest rate. Indeed, the ONS says that more than half (57%) of the fixed-rate mortgages coming up for renewal in 2023 were fixed at interest rates below 2%.
With the base rate standing at 4.5% as of May 2023, it’s highly likely that your repayments will rise once your deal ends.
If your lender has offered you a new fixed- or tracker-rate deal, you may be tempted to accept it. It’s likely that it will compare favourably with the other option available with your current lender, namely reverting to their SVR.
However, it’s important to remember that the deal your lender offers you is unlikely to be the best deal available in the marketplace. Only by speaking to an expert can you establish whether there may be significantly better options with other lenders.
It’s worth remembering that even a small reduction in interest rates can generate significant savings over the term of a deal.
For example, on a £400,000 repayment mortgage over 20 years, finding a deal that was just 0.5% cheaper than the one your lender offers you would save you £104 a month, and more than £6,200 over a five-year period (using the Altura mortgage calculator).
2. The deal may not be suitable for your circumstances
Another reason to consult an expert before you accept a “product transfer” is because the deal your lender has offered you may not be the right one for your circumstances.
For example, if they offer you a two-year fixed-rate deal, that might not be suitable. You might be very happy in your home and want to benefit from longer-term security – perhaps over five years or longer.
Conversely, your lender may offer you a deal with significant charges for early repayment, and you’d rather maintain some flexibility based on your current plans.
Consequently, you may want to shop around for both a better deal and a product that better aligns with your circumstances.
3. There may be even better deals with your existing lender
When lenders contact you towards the expiry of your current deal, anecdotal evidence suggests that they don’t send you a wide choice of deals from which to choose.
As an example, we recently spoken to a client who was coming to the end of their fixed-rate deal. Their lender – one of the UK’s best-known names – had offered our client a two-year fixed rate with no associated fee.
When we did our research to establish whether this was the right choice for our client, we discovered that not only were there better rates available elsewhere, but that there were also more suitable deals available from our client’s lender.
For example, they offered a similar deal at a lower interest rate with an arrangement fee. When we did the calculations, it was much better for our client to pay the fee and benefit from lower repayments over the two-year term.
Even if the deal your lender has offered seems competitive on the face of it, always speak to an expert first. We can do all the calculations, work out the overall cost over two, three or five years, and help you establish the best overall option for you.
Get in touch
If your mortgage deal is coming to an end, don’t simply accept the deal your lender offers.
We can consider all the choices available to you and find the right deal for 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.
