What Happens When Your Fixed Rate Mortgage Ends?

Many homeowners have been benefiting from historically low Bank of England Base rates over the last decade.

These low interest rates have helped many to either buy homes or continue to live in their homes during several years of uncertainty and ‘budget-tightening’.

In addition to low interest rates, many mortgage lenders have been offering borrowers discounted interest rates during the first few years. The argument is that new homeowners are cash poor and an initial low rate helps them to pay for all the costs associated with buying a new home. Unfortunately, these initial rates will, eventually, come to an end and when they do the cost of your mortgage may change - sometimes dramatically.

The same is true of capped or fixed rate deals where interest rates might have been set at a certain figure, which will revert to a known variable (such as the Bank of England Base Rate or the lender’s Standard Variable Rate) at the end of the fixed rate period.

All of the above mentioned indices are largely linked, in reality, with most lenders setting their SVR (Standard Variable Rate) a little higher than the Base Rate of the Bank of England. However, the SVR for each lender may be more or less competitive and as such it’s worth shopping around whenever your rate reverts to the lender’s SVR.

Tracker mortgages that are linked to indices like the current Bank of England Base Rate or LIBOR tend to be more predictable as both indices are published regularly and are set, either by the Monetary Policy Committee of the Bank of England or by the major banks in the case of LIBOR.

Many lenders will notify you when your fixed term is due to end, but some may not. If you arranged your mortgage through a Mortgage Adviser, it is likely that they will be in touch before your fixed rate finishes so that they can search the market for a new mortgage product for you.

If your property has increased in value since you took your mortgage you are likely to obtain a more favourable rate.

If you have more disposable income than before, you may qualify for a deal that you could not previously secure.

We recommend that you always take professional independent advice from a mortgage broker who can look into these factors for you when considering a change in your mortgage provider.

Contact us today on 01628 507477 to speak to an advisor.