What Happens at the End of a Fixed Rate Mortgage?

With a wave of recent headlines about millions of mortgage deals expiring by Spring 2024, you might be wondering what happens at the end of a fixed rate mortgage. You may be concerned about current mortgage rates and even more worried about the future mortgage rates.

This guide breaks down everything you need to know about what to do when your fixed rate mortgage deal ends. The good news is that if you are pro-active, you can secure a competitive rate on your mortgage and keep it affordable for the foreseeable future.

Let’s explore what happens at the end of a fixed rate mortgage.

What is a Fixed Rate Mortgage?

When you take a mortgage product in the UK you will typically be offered a mortgage deal. The most common mortgage deals are either fixed or tracker rate products.
If an interest rate is fixed it means that the rate will remain the same until the end of the product term.

The rate will not change, and you will be able to budget for your mortgage payment exactly each month. In simple terms, your interest rate is fixed and so is your mortgage payment. Most mortgage products in the UK are fixed rate mortgages.

What Are the Options After a Fixed Rate Ends?

When a fixed rate deal ends there are several options available to you. You will normally receive a letter from your lender three months prior to your deal expiring reminding you of the end date. They will typically offer you a product transfer option to remain with them instead of refinancing with a different lender.

If you used a mortgage broker, they are likely to call you a few months in advance of your deal ending to help you remortgage and avoid a Standard Variable Rate. Boon Brokers are proactive and will send a letter, text and e-mail 6-months before your product term expires.

Remortgaging

Remortgaging is the most common solution to an expiring mortgage product term. When you remortgage, you switch from your existing lender to a new one and secure a new mortgage deal.

Remortgaging is likely to be the most cost-effective option as you will be able to choose from hundreds of products on the open market, rather than a limited range of products from your existing lender. However, remortgaging does require a brand-new application with the requirement of a valuation (either physical or automated) and legal work. This means that remortgaging can take longer to complete than a product transfer with your existing lender.

Although, as long as your mortgage broker submits a remortgage application well in advance of your product expiry date (at least a few months before), there should not be any timescale issues with completing just as your current rate comes to an end.

Product Transfer

A product transfer is like a remortgage except you stay with your existing lender. There are a few reasons why you might wish to stay with your current lender:

• They provide the best deal for your circumstances
• Convenience
• Avoid the fees charged for switching lenders

A product transfer will secure a new mortgage deal with your existing lender. However, as mentioned previously, product transfers are unlikely to be the most suitable option for you as there are hundreds of alternatives offered on the open market. You should utilise the experience of a whole-of-market broker, like Boon Brokers, to identify the most suitable product available.

Deal Lapse – Standard Variable Rate

If you decide not to remortgage or take a product transfer, your mortgage deal will expire, and your mortgage will default to your current lender’s Standard Variable Rate.

Realistically, there are only a handful of situations where this might be preferable to remortgaging.

For example, if you only have a few months remaining on your total mortgage term and do not want the hassle of remortgaging. In almost all other circumstances it is best to remortgage or product transfer.

What Happens if I decide to Remortgage?

If you decide to remortgage you, or your broker, will need to apply for a mortgage product with a different lender. This is much the same as your initial mortgage application except you may not need to arrange a survey to ensure that the property is mortgageable. Nowadays, many lenders will process an automated valuation (AVM) to assess your property. If the AVM is successful, a physical valuation will not be required. Your broker should make you aware if a physical or automated valuation has been requested by the lender.

The legal process of switching a mortgage is also much faster as the bulk of conveyancing will have been completed at the time of taking your mortgage.

This means that a remortgage can complete in a matter of weeks compared to the several months it likely took for your original mortgage application.

Many U.K lenders offer a ‘Free Legals’ incentive with their mortgage products. This means that they will fund the legal side of the remortgage transaction. However, the caveat with ‘Free Legals’ is that you must proceed with the lender’s allocated solicitor and forego your own. If a lender offers a Cashback alternative to Free Legals, which provides funding to cover the legal fees of your own solicitor, it is advisable to proceed with Cashback instead. This is because you can select your own solicitor who you know and trust to process the case efficiently and to a high standard.

What Are the Costs of Remortgaging?

There are typically some fees attached to remortgaging such as a lender’s booking and valuation fees.

If you are using a mortgage broker that charges a fee for advice you will also incur this cost. Mortgage broker fees can make remortgaging expensive and brokers have been known to charge up to 2% of the loan sum. This can cost thousands of pounds in unnecessary fees over the course of your mortgage term. According to the government’s Money Helper Service, the average mortgage broker fee charged in the U.K is between £300.00 and £500.00.

To avoid these costs, it is best to use a reputable whole-of-market mortgage broker that does not charge for their mortgage services, like Boon Brokers.

Is it Worth Remortgaging and Switching Lenders?

In most cases it is best to switch lenders and remortgage rather than accept a product transfer.

This is because the mortgage market changes (sometimes rapidly), and your existing lender may not be the best provider for you anymore.

The aim of remortgaging is to secure the cheapest and most appropriate mortgage deal from the entire market. Some borrowers show blind loyalty to their existing provider and proceed with their product transfer options. We would strongly discourage you from doing this.

Your mortgage broker will be able to compare your existing lender against the offerings of other lenders and make a recommendation to you.

Speak to a Broker

Some mortgage brokers only deal with a limited number of lenders. It is best to speak with a mortgage broker that is Whole of Market with a wide range of lenders on their panel. Remortgaging with a reputable mortgage broker can be a streamlined, stress-free experience.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers provides fee free mortgage advice.

Contact us if your mortgage deal is due to expire soon and find out the best options available to you today.