What to Do When Your Fixed Rate Mortgage Deal Ends
As your fixed-rate mortgage deal approaches its end, you may be wondering what your next steps should be. This period can be daunting, especially if you’re unsure about what happens next or how it might impact your finances.
However, with the right guidance and a clear understanding of your options, you can make informed decisions that will benefit you in the long term.
At Kerr & Watson, we specialise in providing expert mortgage advice to ensure that you go through this transition smoothly. We’ll explore what happens when your fixed-rate mortgage deal ends and the steps you can take to secure the best possible outcome.
What Happens When Your Fixed-Rate Mortgage Ends?
When your fixed-rate mortgage deal comes to an end, you will automatically transition to your lender’s Standard Variable Rate (SVR) unless you take action beforehand, for instance, booking a new rate.
The SVR is typically higher than the interest rate you enjoyed during your fixed period, which means your monthly mortgage payments could increase significantly if you go on to this rate.
For example, if you were paying a fixed rate of 1.9% on a £250,000 mortgage, your monthly payment might have been around £1,055. However, moving to an SVR of 4.5% could see your payments rise to £1,405 an increase of over £350 per month.
This shift can have a considerable impact on your financial situation, so it’s important to explore your options before your fixed-rate deal expires to make sure you give yourself ample time.
Find out Your Options
Steps to Take Before Your Fixed-Rate Mortgage Ends
Planning ahead is crucial when your fixed-rate mortgage is nearing its end. Here’s what you should do to prepare:
Review Your Current Mortgage Terms
Start by checking the terms of your existing mortgage. Understand when your fixed-rate period ends, what the current interest rate is, and what the SVR will be after the fixed period if you were to leave the mortgage to go on to this. Also, review any early repayment charges or exit fees that might apply if you decide to switch mortgages before the fixed term concludes. It is rarely worth doing that but always explore, or take professional advice.
Consult a Mortgage Adviser
Speaking with a mortgage adviser, such as Kerr & Watson, can provide you with valuable insights into the best options available to you. An adviser can compare the entire mortgage market, offering tailored advice that fits your specific circumstances and goals.
Plan and Budget for Changes
With the potential for your mortgage payments to increase, it’s important to assess how this will affect your budget. Planning ahead will allow you to adjust your finances accordingly and best avoid any unexpected financial strain.
Explore Remortgaging Options
Remortgaging may help you secure a better deal, either with your current lender or a new one. Start researching your options three to six months before your fixed-rate period ends, so you have plenty of time to make an informed decision. Get in touch with your mortgage adviser so they can start researching this for you.
What Are Your Options When the Fixed-Rate Period Ends?
When your fixed-rate period concludes, you generally have three main options:
Move onto a Standard Variable Rate Mortgage
If you do nothing, you’ll automatically move onto your lender’s SVR. While this option requires no additional effort, it’s often more expensive and less predictable than other options. The interest rate can fluctuate at any time, making it difficult to budget in the future.
Advantages of SVR
- No early repayment charges, which is ideal if you plan to move house soon or make overpayments, giving full flexibility.
- No administrative fees for staying with the same mortgage.
Disadvantages of SVR
- Higher and more volatile interest rates.
- Less stability in your monthly payments, which can complicate budgeting if you need your outgoings to remain at a certain level.
Remortgage with Your Current Lender
Remortgaging (or applying for a product switch) with your existing lender can be a straightforward process. Since your lender already has your details, the administrative burden is lighter, and the process tends to be quicker.
Advantages of Remortgaging with Your Current Lender
- Fewer documents are generally required, as your lender already has your information.
- Usually no need for a new property valuation or a legal process.
Disadvantages of Remortgaging with Your Current Lender
- You may miss out on better deals from other lenders.
- Limited options if your lender’s offerings are not competitive.
Remortgage with a New Lender
Switching to a new lender can open up a range of competitive deals, potentially saving you money in the long run. However, this option involves more paperwork, processes and a new round of credit checks.
Advantages of Remortgaging with a New Lender
- Access to a wider range of mortgage products, increasing your chances of finding a better deal.
- Potentially better terms and lower interest rates due to the number of options.
Disadvantages of Remortgaging with a New Lender:
- Longer process due to the need for a new property valuation, credit checks and the legal process.
- Additional costs, such as legal fees and possible arrangement fees.
Is Remortgaging Always the Best Option?
Remortgaging isn’t always the best choice for everyone. It’s essential to weigh the costs against the potential savings. For instance, if the fees associated with remortgaging outweigh the benefits of a lower interest rate, you might be better off staying with your current lender or even on the SVR for a short period.
Similarly, if you’re planning to move house in the near future, the flexibility of an SVR might be more appealing, as it usually comes with no early repayment penalties.
At Kerr & Watson, we can help you understand these decisions, ensuring that you choose the option that best suits your financial goals.
Conclusion
As your fixed-rate mortgage deal comes to an end, it’s wise to take proactive steps to manage your finances effectively. Whether you decide to remortgage with your current lender, switch to a new lender, or remain on the Standard Variable Rate, understanding your options and planning ahead will help you make the best decision for your circumstances.
At Kerr & Watson, we pride ourselves on offering personalised mortgage advice that aligns with your needs. Our team is here to guide you through the remortgaging process, ensuring that you secure the best possible deal.
Contact Kerr & Watson today to discuss your mortgage options and let us help you find the ideal solution as your fixed-rate mortgage deal ends.
