What Happens at the End of a Fixed-Rate Mortgage Term?

When your fixed-rate mortgage term concludes, your lender typically transitions you to their standard variable rate (SVR), which often exceeds your previous fixed rate. This shift can be jolting, often resulting in significantly higher mortgage payments.

The disparity could mean paying hundreds more each month. To avoid overpaying, it's integral to plan ahead and explore alternatives. While this transition period might feel uncertain, it presents an ideal moment to reevaluate your financial situation and potentially secure a more favourable deal.

What is the difference between fixed-rate and SVR mortgages?

A fixed-rate mortgage maintains consistent repayments throughout the agreed-upon term, whether it spans two, five, or ten years.

In contrast, an SVR mortgage offers fluctuating interest rates. While it may be affected by the Bank of England base rate, your lender retains full control over adjustments, which can occur at any time and without explanation.

What are my options when my fixed-rate mortgage ends?

When your fixed-rate mortgage term nears its end, you face two choices: transitioning to your lender’s SVR or remortgaging to a new deal, whether with your current lender or a different one. Each option presents its own advantages and drawbacks.

SVR pros

• Early repayment charges (ERCs) usually cease after the fixed-rate period, allowing you to pay off your mortgage early without a penalty.

• Reduced monthly payments if interest rates decrease.

• Remortgaging expenses might exceed the cost of sustaining a higher interest rate.

• No need for a credit check if you retain your current mortgage arrangement.

SVR cons

• Typically higher interest rates compared to fixed-rate deals.

• Lender discretion over rate adjustments, potentially leading to unpredictable increases.

• Possibility of missing out on better mortgage deals by sticking with the SVR.

• Financial strain if the increased payments are unexpected or unaffordable.

Remortgaging pros

• Generally quicker and more straightforward process than obtaining an initial mortgage.

• Opportunity to secure a favourable fixed-term deal if interest rates are low.

• Potential for greater flexibility, including overpayments or mortgage holidays.

• Opportunity to leverage increased property value for a lower loan-to-value ratio.

Remortgaging Cons

• May entail undergoing another credit check and affordability assessment.

• Changes in financial circumstances could hinder approval for a new mortgage.

• Setup costs of remortgaging might outweigh savings from a lower interest rate.

• Remortgaging may not be viable if you have minimal equity or if your home's value has decreased.

It’s notable that applying for a remortgage can affect your credit score. If you want to get an idea of your eligibility before you apply, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to highlight any possible mistakes or fraudulent activity on your profile, so that you can quickly deal with any issues. The trial and subscription can be cancelled at any time.

Do I have to remortgage when my fixed-rate deal ends?

Remortgaging at the end of your fixed-rate deal is not compulsory. However, many individuals choose this option to secure the most competitive interest rates and keep a consistent monthly mortgage payment.

What are the costs of remortgaging?

Remortgaging often incurs various additional fees and charges, such as arrangement fees, booking fees, valuation fees, conveyancing fees, and early repayment charges.

The specific costs can differ between lenders, and not all fees may apply in every case. It's essential to assess these prospective expenses to determine whether remortgaging is financially advantageous, as sometimes the accrued fees could offset the savings from switching to a new deal.

When can you renegotiate mortgage terms?

In general, the window for renegotiation without ERCs or penalties is specified in your agreement, often within 6 months of your current term concluding. If you've transitioned to your lender’s SVR, you can initiate negotiations for a new fixed-rate term without delay.

It's advisable to commence the search for new terms before your mortgage term expires. This allows ample time for paperwork preparation and facilitates a smooth transition, minimising the need to move to the SVR.

Get expert advice on your fixed-rate mortgage

As your fixed-rate deal approaches its end, the array of options available can be overwhelming, making it challenging to determine the best course of action. For some, remortgaging might offer the most beneficial solution, while others may find staying on their lender’s SVR or switching to a new provider better for them.

In essence, the optimal choice depends upon your individual circumstances and financial position. Given the complexity and financial stakes involved, seeking guidance from a knowledgeable mortgage broker is strongly recommended before making a decision.

Remortgage Deals

At The Mortgage Genie, our team of experienced brokers possesses the expertise and market insight to identify and secure the most suitable product as your fixed-rate term concludes, resulting in significant long-term savings.

Contact us at 01915809890 to connect with a dedicated professional tailored to your unique situation. And why not see how much you could borrow up to today by using our remortgage calculator?