What Happens When Your Fixed Rate Mortgage Term Ends?

A fixed rate mortgage, where your monthly repayments stay the same for the whole term, can bring stability and security to your finances as you know exactly what you’ll be paying out every month on your mortgage. But what happens when you get to the end of the fixed rate term?

In this article we’ll look at the range of options you have when you’re nearing the end of a fixed rate mortgage term, what happens if you do nothing, and how a mortgage broker can help you keep your repayments as low as possible.

What happens at the end of a fixed rate mortgage term?

For the duration of the fixed rate term your interest rates remain the same and so you pay the same every month to your lender. If you come to the end of the fixed rate term and do nothing, you will be switched as a default to your current lender’s standard variable rate (SVR).

Depending on the rates you fixed at and the Bank of England’s base rate, the SVR is very likely to be higher than your fixed rate, meaning your monthly repayments will increase and potentially also vary month by month.

Do you have to stay with your lender’s SVR?

No, although you’ll need to organise a new mortgage in time to prevent this from happening automatically. While there are some benefits to sticking with your current lender’s SVR mortgage, such as no new product fees or early repayment charges, it’s normally not the best value option long term, and if you’ve enjoyed the predictability of a fixed rate mortgage then you may not want the fluctuations of an SVR.

What are your other options?

So what are the alternatives when you get to the end of a fixed rate mortgage term?

Switch to a new product with the same lender

Technically known as a product transfer rather than a remortgage, taking a new mortgage with your current lender doesn’t have to mean sticking with their SVR; it could be another fixed rate mortgage or other type of rate they offer.

As the name suggests, a discount rate mortgage offers an initial discounted period based on the SVR, making it cheaper, while still retaining the ability to rise and fall. A tracker mortgage varies too, but it moves in line with, (normally a little above), a fixed measure, usually the Bank of England base rate. This makes a tracker mortgage more transparent than an SVR mortgage – SVR rates are completely at the discretion of the lender.

Switching to a new mortgage with your existing lender is straightforward, but it means you could be missing out on better deals elsewhere.

Remortgage with a different lender

Your other option is to look for a better remortgaging deal with a different lender. While this may incur additional product or admin fees, these can normally be added onto the loan if you don’t want to pay upfront, and if you can find a better deal it’s still worthwhile long term.

A remortgage could be a new fixed rate deal, or a variable rate – either discounted, tracker or variable.

Make uncapped overpayments or settle the whole debt

Not everyone is in a position to do this, but if you are, the end of a fixed rates period would be a good time to do it. While you aren’t locked in a deal with your lender, restrictions on the amount you can overpay by without incurring extra fees don’t usually apply.

Moreover, if you have the means to settle you entire mortgage, you could do so without being hit with early repayment charges. Take a look at our calculator for a rough idea of how this might work out for you:

How a broker can help secure the best fixed rate mortgage terms

If you’re unsure about whether or not to stick with your current lender or shop around then your best option is to get advice from a broker who specialises in remortgaging. They will not only have a wealth of experience and contacts but they’ll be up to date on the current economic climate and be able to help you think ahead to what might happen over the next few years and how increases in interest rates might impact your borrowing.

A specialist broker will be able to look at your whole situation and assess what sort of mortgage is right for you, whether that’s another fixed rate or a variable rate, and then use their expertise and existing relationships with lenders to leverage the best rates.

When to start looking for a new mortgage deal

Your lenders will usually contact you around six months before your current deal is up, but if they don’t, you shouldn’t wait until your current term is nearly up to contact a broker and start looking for a new deal, especially at the moment when rates are increasing.

Depending on the lender you may be able to apply for a new deal and lock in a rate as much as six months before the end of your existing mortgage, which is good news if rates then continue to rise in that six months.

Timing is crucial here – too soon and you risk the new offer expiring or exiting your current mortgage too soon and having to pay early repayment charges. Leave it too late though and rates could rise further or you could end up switched to an SVR deal you don’t want. Your broker will be able to look at the detailed timing of your existing loan and the terms of a new deal and make sure you apply at the right moment.

Is a fixed rate mortgage a good idea in the current economy?

While it’s hard to give an answer that’s appropriate for every individual set of circumstances, what we can say is that at the time of writing, (August 22), interest rates are predicted to increase for the foreseeable future, meaning that fixing could be a good option for a lot of people. But there is, of course, no absolute certainty of what will happen.

Keep in mind that we’ve seen mortgage interest rates already rising significantly over the last 12 months. We’re a long way from July 2021 when Nationwide launched their record breaking three and five year fixed rate mortgages at 0.94% and 0.99% – now you can get a three year fixed rate from Nationwide of 4.04% with a maximum LTV of 60%.

Other lenders have been pushing up rates too. If you want to remortgage to a fixed rate mortgage from Santander you’re currently looking at rates of 3.79% for a two year fix and 3.84% for five years. With Natwest you could get 3.43% or 3.48%. All of these deals come with product fees and are correct at the time of writing, although subject to change due to market conditions.

The above rates were accurate at the time of writing and subject to change.

If you want to protect yourself from any increases in your mortgage repayments in the short to medium term then a fixed rate mortgage is a good option. Even if you’re six or seven months away from the end of your current term it’s worth looking now to see if you can lock in a fixed rate on a remortgage.

If your fixed rate mortgage term is due to end more than six months from now then depending on what it’s going to cost you in early repayment charges and remortgaging fees, it may even be worth paying and getting a new fixed rate deal now before interest rates get even higher. You don’t want to rush into this lightly, but your broker will be able to help you assess the pros and cons of an early exit.

Get matched with a specialist remortgage broker

Your mortgage is one of your biggest financial commitments and choosing your next mortgage is not a decision to be taken lightly, especially when the UK is experiencing difficult financial circumstances – get it wrong and it could be very costly.

With our broker matching service you don’t have to worry. Give us a call on 0808 189 0463 or make an online enquiry and we’ll quickly assess your needs and match you with one of the pre-vetted advisors we work with. We’ll make sure they have the right match of skills and experience for your circumstances and our service is completely free, so you really do have nothing to lose.