Around 1.8 million fixed rate deals are ending in the UK this year. If yours is one of them, the most important thing is to start looking at your options sooner than you think you need to, typically 6 months before the rate ends.
Most lenders will allow you to lock in a new deal up to six months before your current one ends. That means if your rate expires in October, you should be looking now. The reason this matters is that if you do nothing, your lender will move you onto their standard variable rate automatically when the fixed period ends. Standard variable rates are typically much higher than any fixed deal available in the market, and they can change at any time.
If your fixed rate was taken out in 2021, you are likely coming off something in the region of 1% to 2%. Rates today are higher than that, which will mean an increase in your monthly payments. How much depends on your outstanding balance and the deal you move onto. On a £200,000 mortgage, the difference between a 2% rate and a 5% rate is roughly £500 a month, so it is worth understanding your new figure well in advance rather than getting a shock when the notification of the new amount comes from your mortgage lender.
The decision most people face is whether to take a two, three or five-year fix. Two-year deals appeal to people who think rates will fall further and want to be free to remortgage again sooner. Five-year deals offer more certainty. Neither is automatically right. It depends on your plans and how you feel about the risk of rates moving against you and how much certainty you prefer.
One thing worth knowing is that many lenders will let you switch to a better deal between now and when your new rate actually starts, if rates improve in the meantime. So locking something in now does not necessarily mean you are stuck with it. However being locked in to a deal can protect against rate increases or product withdrawls.
Do not just accept whatever your current lender offers either. A product transfer with your existing lender can sometimes be the easiest option, but it is not always the best value. Comparing it against the wider market takes a small amount of time – we take the strain and can save a significant amount of money over the course of the deal.
Your home may be repossessed if you do not keep up repayments on your mortgage.
