If your fixed mortgage has ended, or will soon, you could face a large increase in your mortgage payments.
Most mortgages revert to their lender’s Standard Variable Rate (SVR) when a fix ends. Some lenders use a different term, such as “Follow On Rate”, but SVR is the most common.
In 2023, the average SVR is 7.3% – many are much more. Millions of people are paying the SVR and most of them could do better, sometimes saving over a £1,000 a year, by switching.
Staying on an SVR for a while because you are about to move can make sense, but it is hardly ever a good medium or long-term option.
“I won’t be able to afford a new fix, let alone the high SVR”
This article is looking at your options about what fix or remortgage to get.
But the FCA expects more than half a million people will have difficulty paying their mortgage by the end of 2024 because of rising rates.
If this is your main concern, read Worried about the cost of your mortgage? Find out the help your lender can offer and talk to your lender about this as soon as possible. Delaying makes things harder.
“Fix and fix long” – not any more?
For years the standard advice has been that people should get a new fix and fix for as long as possible.
But with many experts expecting mortgage rates to peak in the next year or two and then reduce, this may not be a good time to get a fix, let alone a long fix, at what is a comparatively high rate.
Tracker mortgages have not been common for a long while. They track an index up and down, so they are variable rate mortgages. For example a tracker mortgage could be “Base rate plus 2%“. Here you do not get the benefit of certainty about what you will be paying on what is probably your largest bill.
But trackers are normally cheaper than the lender’s SVR. And often there are no early repayment charges. So it may make sense to get a tracker for a while and then switch to a fixed rate when things are more clear.
This article looks at your choices.
Your options when a fixed rate mortgage ends
When a fixed rate mortgage ends, you have four options:
- do nothing – your mortgage moves to a SVR with your current lender;
- (a) get a new fixed rate from your current lender or (b) get a tracker rate from your current lender;
- get a different mortgage (fixed or tracker) with your current lender;
- remortgage (fixed or tracker) with a different lender.
Getting a new fix or tracker is often easy. Even if your credit record isn’t good, you may be able to get a reasonable rate from your current lender who will nor normally check your credit record or make an affordability calculation.
You can switch months or years after your fix has ended – you haven’t lost your chance if you don’t do it straight away.
The options explained
Do nothing and pay a variable interest rate
At the end of a fixed rate, your mortgage continues but the interest rate changes.
Am example: You took out a 25-year mortgage and a 3-year fix. At the end of that three year fix:
- your mortgage term has dropped to 22 remaining years;
- your interest rate changes to the variable interest rate that was set in your mortgage terms.
For most mortgages, the variable rate you will pay is your mortgage lender’s Standard Variable Rate (SVR). SVRs between lenders – in December 2022 Barclay’s SVR was 6.49% and Santander’s 6.75% and Halifax’s 6.99%. SVRs from a “bad credit lender” may be much higher.
You need to know what your mortgage says and you also need to know what this rate is at the moment. If you aren’t sure, phone your lender – the answer is going to be very important for deciding what to do next.
Get a new fix or a tracker from your current lender
You can keep the same mortgage and get another fixed rate or a tracker from your current lender.
This is usually very simple. Most lenders won’t need to go through affordability calculations or look at your credit record. SeeCan I get a new mortgage fix with poor credit? for details.
A “new fix” keeps everything else about your mortgage the same: the term, the amount borrowed etc.
So with the 25-year mortgage 3-year fix example above, if you now choose a 5-year fix your term stays at 22 years. And in 5 years time when the new fix ends, you will have 17 years left on your mortgage.
A lender will often write to you a few months before your fix ends and offer another one. Look out for this – it isn’t junk mail!
You don’t have to wait for this letter. Many lenders will talk to you about your options with up to 6 months to go before your current fix ends.
This may be a good offer, but it isn’t always – they are hoping you just accept it without looking at other possible deals. Many lenders keep their best deals for new customers…
So ask yourself:
- should I fix, if so, how long for?
- would I be better off getting a tracker mortgage if my lender offers one?
- could I get a better deal elsewhere?
Remortgage with your current lender
Sometimes you want to change the details of your mortgage, for example:
- add your partner’s name to the mortgage;
- borrow more money eg to pay for an extension or to consolidate unsecured debt
- pay a chunk off;
- change the length of the mortgage.
Here you aren’t simply looking for a new fixed rate or a tracker, you need a completely new mortgage.
This isn’t as simple as just getting a new fix.
The lender will want to look at the affordability of the new mortgage – especially if you are borrowing more or taking someone’s name off the mortgage. In 2022 these affordability checks have become harder to pass because of the increases in your bills and other inflation.
There may need to be a new valuation of your house, proof of your income, your credit records will be checked and bank statements looked at. There may be legal fees, but these can usually be included in the mortgage.
If your lender says No to the new mortgage, ask why. Then you may want to see if you can get the mortgage you want from a different lender.
Remortgage with a different lender
This is getting a completely new mortgage. The new lender will need to see proof of your identity, value the house and look at your finances to check the mortgage is affordable.
This may sound stressful but it’s not quite bad as buying a house because you already own the house and you can always carry on with your current mortgage!
What deals you may get depends on how much equity you have. Equity is the current house value minus your mortgage, so you need a rough value for your house. If you have more than 20% equity you will have a wider choice of deals and they will be cheaper than if you have only 10%.
Should you fix?
There are two main situations where it probably isn’t a good idea to get a new fixed rate:
- if you are likely to move soon, it may be better to stay on a variable rate until you do. Most fixed rates have penalties – sometimes large – if you repay them early.
In theory getting a portable mortgage should solve this, but porting the mortgage to your new house doesn’t always work well if you need to borrow more, or are buying somewhere a lot cheaper.
- when you are close to the end of a repayment mortgage, staying on a variable rate makes sense. The interest you are being charged is dropping every month, so the gains from fixing are less.
The other situation is if you think mortgage rates may fall. No one can be certain what will happen but a good broker will be able to talk you through the options. The broker’s speculation about future rates are still a guess but they are an educated guess.
Brokers can also help you compare different options from different lenders, where the fixes, terms, fees and early repayments charges are different.
Some common situations
Your house has gone up a lot in value
This is good news because you will have a better choice of deals – if you just scraped a 5% deposit when you bought two years ago and now you have more than 10% equity for example. Here in theory you may be able to get big savings by shopping around and looking at other lenders, so don’t take the first deal your current lender suggests.
But more equity will not help the affordability calculations for a mortgage. So this may still mean you have to stay with your current lender.
Things have got harder
If your family has got larger, your income has fallen, you are now self-employed, you are struggling because of rising cost of living, a poor credit rating … anything like this suggests that you may find it difficult to remortgage with a different lender.
Getting a new fix on your current mortgage may be your only option as your current lender is unlikely to do an affordability check. But this may still leave you struggling to may the mortgage. get debt help as soon as possible in this situation.
You want to borrow more to extend the house / new kitchen
When your mortgage fix ends is the best time to look at this, but it may be harder than you expect. Many lenders will insist you have at least 15% or 20% in the property after the remortgage. And as mortgage rates have gone up, you will already be paying more for your current mortgage. Go through a broker, not direct to a lender.
You want to borrow more to repay some expensive debt
You need a lot of equity for this to work – you won’t be able to borrow down to 5%. Some lenders won’t allow it at all and most will limit the amount you can have.
Even if you can do this, it may not be a good idea. A lot of people just go on to get more credit once consolidating has “solved” their previous debt problems – in a few years time you have debt problems again and a much bigger mortgage.
If your situation is so difficult you are thinking of going to a broker who specialises in bad credit, take some debt advice first. There may be other options for dealing with large unsecured debts – but once you have put debts into your mortgage, these don’t work.
Extend the term of your mortgage
If you are remortgaging with a different lender, it can be tempting to go back to a 25-year mortgage, as that will reduce your payments even further.
But the point of a mortgage is to actually buy your house not be on an endless treadmill of 25 year mortgages. It’s usually best to resist this temptation and stick with your current term.
Also if you want to extend your mortgage term beyond your retirement age, your lender will usually want to fo a full credit record and affordability check. Which they normally won’t do if you only want a new fix with the same term.
Need some expert help?
If this all feels too complicated, don’t decide it is too hard and give up!
A mortgage broker will be able to suggest good deals and may have access to deals you can’t find. they are experts who are used to helping clients through the how long should I fix for decision. Or would a tracker be better at the moment?
You can find a broker here: Unbiased: Find an adviser. Choose a broker who covers the “whole market” so you get the best choice of deals.
Even if you are good at most things financial, you should still consider using a broker. Mortgage choices can be complicated and brokers are also experienced in helping a mortgage go through as speedily as possible.
This article is kept up to date.