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What happens when my fixed-rate mortgage ends?

When your fixed rate mortgage deal ends, your mortgage will revert to your lender’s standard variable rate (SVR) of interest.

It’s important to understand what this could mean for you, and what (if anything) you should do about it.

Fixed rate mortgage ends

You may have fixed your rate up to five years ago (sometimes even more), and a lot will have changed since then, both in your own circumstances and in the mortgage market at large.

The ending of your fixed rate mortgage can even be an opportunity for a financial spring-clean, as you may be able to switch to an even better deal.

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What are my options when my fixed rate mortgage ends?

You face a simple choice if your fixed-rate mortgage deal is ending soon: do nothing – in which case your lender will move you onto the SVR mortgage – or remortgage to a new deal.

What happens if I stay on an SVR mortgage?

This interest rate on an SVR mortgage will (almost always) be higher than your fixed rate was.

To give you an idea of the difference, in April 2020 the rate for a typical two-year fixed term mortgage was under 1.5 per cent. By contrast, the average SVR was 3.5 per cent or higher.

The SVR can also change at any time, at your lender’s discretion.

Various factors can cause it to rise, including changes to the Bank of England base rate, but it’s important to remember that the lender can increase it whenever they wish, and don’t need to give a reason.

And although disproportionately large increases are unlikely (since this would deter new customers) they can also increase it by any amount, in theory.

This can make it hard to budget for the long term, since you don’t know by how much your mortgage repayments may rise in months and years to come. This is why most homeowners prefer to have some form of preferential mortgage deal.

What happens if I decide to remortgage?

If you choose to remortgage, you can either try to get a new deal with your current mortgage provider, or shop around to find a different mortgage provider offering an even better deal.

A mortgage broker can be a great help in doing this. Your mortgage broker can search the whole market and recommend the best mortgage deals for you, based on your specific needs.

Your lender will want to know if your circumstances have changed, as this could affect your affordability assessment and credit score.

Common changes that may affect your mortgage prospects include having children, taking on new debts, or becoming self-employed.

What are the costs of remortgaging?

When you remortgage, there will usually be additional costs involved.

These may include:

  • Early repayment fee (which may apply beyond the length of your fixed rate)
  • Arrangement fee (can be high)
  • Booking fee (usually no more than £200)
  • Valuation fee (though with remortgaging this is often free)
  • Conveyancing fee (again, usually free when you remortgage)
  • Mortgage broker fee (if applicable)

Sometimes the combined fees might potentially outweigh the savings you stand to make through remortgaging to a new deal, so consider this carefully (again, your mortgage broker will help you work this out).

When is the best time to remortgage?

Ideally, you should start planning to remortgage around six months before your fixed rate period ends. Acting early can also help you avoid extra payments. When you actually remortgage may be influenced by a couple of other factors.

Most lenders will allow you to agree a rate with them three months before you start paying. However, remember you may miss out on a cheaper deal later, so be sure to do your research and seek advice.

Bear in mind that your fixed rate period may include early repayment charges, which may apply beyond the length of your deal.

These charges can run in to thousands of pounds sometimes, so you may be better off staying on the SVR for a short time rather than remortgaging immediately.

For more details, take a look at our guide to remortgaging.

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Is it worth getting a new mortgage deal?

In some circumstances, remortgaging may not be the best option. So although it’s good to start thinking about remortgaging in good time, it’s important not to rush into it – as occasionally you’re better off sticking with what you have.

Occasionally, being on an SVR mortgage won’t disadvantage you too much, and may even make things easier for you.

For example, if you are in a position to clear your mortgage with some large overpayments (e.g. from an inheritance), there are typically no early repayment charges on an SVR mortgage.

Similarly, if your outstanding debt is under £50,000, any new mortgage fees could eat into any savings you stand to make, and many lenders won’t consider taking on a mortgage this small.

Also, if your financial situation has changed in a big way, for instance if you or your partner is no longer working or you have new debt, lenders may be hesitant to provide a remortgage.

If you believe you can still comfortably afford the repayments on your new SVR mortgage, staying with it may be the easier option at least until your circumstances improve again.

For more information on what sort of mortgage you may be able to afford, try our mortgage calculator

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.