If your fixed mortgage has ended, or will soon, you could face a large increase in your mortgage payments.
Most mortgage revert to their lender’s Standard Variable Rate (SVR) when a fix ends. In summer 2019, the average SVR is 4.9%. You can get much cheaper fixes than that!
This affects a lot of people. In October 2019, fixed rate mortgages worth £26billion are coming to an end.
More than four million households are paying the SVR and most of them could do better, sometimes saving over a £1000 a year, by switching.
This article looks at your choices so you can see which is right for you. And the important questions – how long should you fix for? and who are the exceptions who shouldn’t fix?
Contents
Summary – 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 variable interest rate with your current lender;
- get another fixed rate from your current lender;
- get a different mortgage with your current lender;
- remortgage with a different lender.
Getting a new fix is often easy – even if your credit record is poor you may be able to get a good rate from your current lender.
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 in detail
1. 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 vary a lot between lenders – in August 2018 Halifax’s SVR is 3.74% and Santander’s is 4.99%.
Some people may have a tracker variable rate that changes when some other rate (often the Bank of England base rate) moves. Yours could be described as base rate plus 2% for example.
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.
If the new rate you will be paying sounds OK, it may still be worthing fixing so you will be safe from interest rate increases for a few years
2. Get another fix from your current lender
You can keep the same mortgage and get another fixed rate from your current lender. This is usually simple. Most lenders won’t need to go through affordability calculations or look at your credit record. I’ve heard people say it took them a quarter of an hour online with their current mortgage provider.
Getting another 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!
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?
- could I get a better deal elsewhere?
3. 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, or pay a chunk off;
- change the length of the mortgage.
Here you aren’t simply looking for a new fixed rate, you need a completely new mortgage.
This isn’t as simple a 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. 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.
4. 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 as 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%.
When shouldn’t you fix?
There are three 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.
- if you are paying a low variable rate, some people are lucky to be paying 2.5% or even less on a variable rate because of the terms of their mortgage – few of them will gain from switching! The regulator has used 3.7% as the boundary here, saying that most people paying more than this should gain from switching.
How long should you fix for?
If you get a fixed rate, you are protected from any rise until the fix ends. Rates have gone up twice in the last eighteen months and they may well go up further.
Longer fixes give you more protection but they cost more. You can think of the extra money for a longer fix as paying for “insurance” against a rise in interest rates.
It can be hard to weigh up if this is worth it but rates are very low at the moment so this may be a good time to lock them in. In 2019 10 year fixes – previously a rarity – are becoming more common and cheaper.
But ending a fixed rate early will cost you an extra fee. So in general you should not fix if you expect to have to move house in that time unless you make sure the mortgage is “portable”. So many people with a growing family or who may need to move for their job will not want to be tied into a 5 year fix, let alone a 10 year one.
The fees charged can vary a lot:
- the larger your mortgage, the more important the interest rate is and the less important the fee is;
- with a small mortgage or for a two-year fix, the size of the fees matters most.
- MoneySavingExpert has a calculator to compare 2 different mortgage fixes.
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 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.
Things have got harder
If your family has got larger, your income has fallen, you are now self-employed, you have a lot more debt, or 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.
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 it may mean paying a higher interest rate on your whole mortgage. Go through a broker, not direct to a lender.
Do consider unsecured loans as an alternative. Putting building costs on your mortgage may sound cheap, but you will be paying for them over a long while. It could be less expensive to pay a higher rate of interest and repay the loan in 7 or 10 years.
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 such as an IVA – 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 years mortgages. It’s usually best to resist this temptation and stick with your current term.
If you originally had a 30 year or longer mortgage, and you are now more comfortably off, this would be a good point to try to reduce your mortgage term!
A checklist of information
With the following information you will be in a better place to make a decision:
- when your fix ends, what variable rate will you be paying?
- how much equity do you have? What % is this of the house value?
- what is your credit record like? Even if you think it is good, check to make sure there are no nasty surprises;
- ask your lender what deals you could switch to;
- check out the best buy tables, eg MoneySavingExpert’s Mortgage Best Buys.
This article has given an overview. For the details, I suggest you download MoneySavingExpert’s guide to remortgaging. It is long! But now you have the important facts, it’s going to be easy to tell which bits are most important for you.
Need some expert help?
If this all feels too complicated, don’t decide it is too hard and give up!
Get help from an expert – a mortgage broker will be able to suggest good deals and may have access to deals you can’t find. And they are used to helping clients through the how long should I fix for decision. 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. Mortgages 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.
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Lynn Jones says
I had 3 year fix on my mortgage they didn’t send letter to say we could put a new fix on when things got bad we got in arrears but we have paid it down as best we could I asked for another fix on mortgage was told I couldn’t and couldn’t have interest only for couple of months my mortgage company changed their name for the company 3 times is this legal
Sara (Debt Camel) says
what is your mortgage lender called at the moment? what interest are you paying?
Katie fogarty says
My fixed rate is coming to an end in four months and i havent received a letter. I want to keep the same provider (natwest) but my credit score has gone down. I have never missed or been late paying my morgage. Do you think i will be able to get a fixed rate through natwest with my score goibg down.
Sara (Debt Camel) says
Probably! If you are just changing the fixed rate and not the term or the amount or anything else. You could give them a ring in and ask what rates will be available when your fix ends.
Sunny Khurmi says
My Fixed rate for 5 years of 5% has ended in October 2018. However due to my previous employer I ended uop with serious arrears on my mortgage. This has ruined my credit score and my partners. We both have a good income and also how property has increased in valve by 60%. Please can you help with some advice. We are unable to clear the arrears due to having three children and our monthly bills.
Sara (Debt Camel) says
Have you looked at how you can get your monthly bills down? It’s important you make an arrangement o start repaying the arrears.
What interest rate is your mortgage now on? What was the fixed rate?
Cathal says
Hi Sara. My Halifax mortgage is due for renewal. I had a 2 year fixed at 1.61%. The SVR is 3.74% adding £90 a month to the mortgage. Halifax are offering 2 deals online. 2 year fixed deal increasing mortgage by £70 per month or 5 year fixed increasing by £85 per month. I’m fearful Brexit could cause economic chaos. Would you have any advice? Thanks.
Sara (Debt Camel) says
I think you should talk to a mortgage broker. You may be able to get better deals from another lender and the broker can talk you through the choices and the advantages of a 2 or 5 year deal.
Jacquie says
Hi Sara
My fixed rate ends 31/10/19 , due to a break up we are selling the house. I have contacted my mortgage and they will not advise as the house is on the market. My worries are that the payments will substantially go up as we cannot lock into a fixed rate , please what advise can you give.
We are currently separated and both pay into the mortgage account
Many thanks
jacquie
Sara (Debt Camel) says
If you are selling the house, it makes sense to live with the lender’s standard variable rate as you don’t want to lock in another fixed rate where there are normally exit penalties if you want to end the fixed early.
Your current lender should tell you what rate the mortgage will change onto when the fix ends.
Sarah says
My fixed rate mortgage is coming to an end soon, and I’m looking to remain with my current provider on a 5 year fixed rate.
Do I put in the current value of my property as it in the current climate or do I put the value of my property when I bought it?
As this would have an impact on my LTV, as it will be a significant different.
Thanks
Sara (Debt Camel) says
It is the current value that matters for your new fix.
Paul says
Hi, I am trying to remortgage but when I asked for a settlement figure on my secured loan it was higher than the outstanding balance. Is this correct and can I offer a counter offer. Thanks
Sara (Debt Camel) says
The settlement figure is usually a figure that you can use any time over the next month or two. So it includes an extra month or two interest. You can ask trhem how they have calculated it and ask for a copy of the contract to if you aren’t sure it is correct. A lender won’t usually negotiate if the amount is right.
Julie says
What should be looked at….is how mortgage lenders or ripping us off and most of us don’t even see it..
My fixed rate is about to expire….so am checking what’s what …fixed rate, 3/5 years , amount etc,etc….feeling really chuffed with myself because at last I’ve got my mortgage under £100,000…. ( the figures or example but to the right scale in terms of value)
5 yrs @ 4.1% for 97,000 @ term left of mortgage 24 yr….I will be paying average £30 a month more…that not great but ok
But then I think what if I put a different value in?
See if you spot what I have?
5yrs 3.1% for £100,000 @ term of mortgage 24 yrs , I be paying less £s ….but I still owe the same 5 yrs ago! My mortgage will never end.
What the hell! Sorry but I can’t win…am hopping mad…
How?? Can this be aloud?…. sorry change of subject…I need to take this further but not sure how…
Sara (Debt Camel) says
Most fixed rate deals you can overpay by 10% per year. If that applies to the larger mortgage at lower rate, take that and immediately pay the 3k in cash off your mortgage.
Paul says
Hi,
I need advice please. I’m trying to remortgage but have been informed about my situation which some companies are surprised at.
My mortgage is in my name only but I have a secured loan but this is in joint names mine and my wife’s.
Is this allowed as some companies are shocked and never came over this. They say you can’t have one name on mortgage and 2 names on a secured loan, it has to be the same.
Please if anyone can assist I would be grateful.
Thanks
Paul
Anon says
i have a recent default against me from a bank which I had an idle account with and they closed it without warning me. I have raised the issue with the FOC and they are investigating. my wife and I had perfect credit up until this and we were just about to remortgage. I had a mortgage offer from halifax until i told them about this and they pulled it. I know there are companies out there specialise in bad credit mortgages but so far any that I have contacted seem to be cowboys and want to take advantage of the situation and charge 3-5k to handle the application with no guarantee of a yes. Can you point me in the right direction or any reputable brokers might be able to help me or give me any pointers on what i should do please.
thanks very much
Sara (Debt Camel) says
My problem is that I have no idea whether a bad credit broker is any good or not… so I simply can’t recommend one.
But if you are remortgaging, where is the rush? Why not just wait a while for the FOS case to go through and get a mortgage at a good rate with no up front fees?
Davide Bardetti says
Good Morning,
i’m about to apply for my first mortgage and i’m honestly a little bit concerned.
Around the web there are extremely a lot of offers and its easy to fall in a disappointment, What i’m trying to say is that some offers you pay same monthly mortgage included of all fees but in the end you re-PAY MUCH MORE than others because of different lenders.(interest included)
My question is: Why on a repayment mortgage of £200,000 @ 20 years, for example, there is a gap of re-payment between all the lenders of 50-70k or more ?
Do Lenders think people are so naive ?
Sara (Debt Camel) says
This is one of the reasons I always suggest people talk to a good broker.
Paul says
Hi Sara, my wife has been made redundant and we’ll be coming to the end of our two-year fixed deal in three months’ time. I have continued to keep up with the payments (no defaults or mortgage holidays). Can my current lender offer me a new fixed deal given the change of circumstances and without having to make a new application? Thank you.
Sara (Debt Camel) says
Yes they can – but they may not.
It’s good if you can avoid payment holidays in this situation but how are you managing without your wife’s income? Will she be able to find another job easily?
Sophia says
Hi Sara,
My 2 year fixed comes to an end soon and I was wondering the advantages of fixing a 2 year v 3 year deal? I have a low LTV and not long left to go but I’m not sure which is best at this point. In the past I have always fixed for 2 years. Both have zero fees. The 2 year is at 1.44% while the 3 year is 1.49%….any advice of what way to swing?
Many thanks for your time,
Sophia
Sara (Debt Camel) says
What is the chance of you wanting to move before 3 years is up? How long left to go on the mortgage?
Sophia says
I probably wont move – unless I win the lottery….there is a £1 difference in monthly repayments between the two and I have just over 10 years left on my mortgage. I checked the deal that I was offered 2 years ago and they were 1.89% for 2 years and 1.94 for 3 years…..so will they drop again due to this whole current situation in the country or is it best to just fix and be secure? I dont really have people to speak to and ask, so it’s quite hard to know what way to swing…of course no one knows the future either! I should also say that I overpay every month to reduce the mortgage term and will continue to do so.
Sara (Debt Camel) says
Well this isn’t “advice” because I am not a mortgage broker and I don’t know what deals are available – but the general suggestion at the moment is to fix for as long as possible, if you don’t intend to move.
Sophia says
Thanks Sara that’s helpful. :)
Annelyn says
I find this forum will help me lot. My 2 years fix rate will come to end this October with Nationwide. My question is, will the bank send me letter to offer me new fix rate deal or should give them a ring?
If I phone them, what normally they asked? Are they going deep about my current job?
Sara (Debt Camel) says
They will usually write to you. You can contact them and ask, but I suggest leaving it for a month or two.
Each lender differs on what you may be asked. As you already have a mortgage it may not be much.