What happens when my fixed rate mortgage ends?

What happens when my fixed-rate mortgage ends?

When your fixed rate mortgage ends, you’ll automatically be moved onto your mortgage lender’s standard variable rate (SVR), otherwise known as ‘Follow on Rate’. How much this will cost will depend on your lender and their interest rates, but SVRs will usually be higher than your old fixed rate. This is because lenders tend to set their SVR a few percentage points above the Bank of England base rate. Right now, the average SVR is an eye-watering 7.27%!

Here’s an example: If you owe £200,000 on a 20-year mortgage and move from a 4.7% fixed rate to a 7.7% SVR, your monthly repayments would rise from around £1,290 to £1,640 per month or over £4,200 more per year.

For this reason, it’s very important to act quickly with your remortgage. Don’t wait until the final moment and risk being placed on your lender’s SVR! It could cost you hundreds if not thousands of pounds. If your fixed rate mortgage is coming to an end or you’ve already been moved onto a variable rate by your lender, see what other deals you could be eligible for by creating a free Tembo recommendation, or keep reading to see our guidance on what to do next. 

Learn more: 5 Reasons Why You Should Remortgage Now

What to do when my fixed-rate mortgage ends?

When your fixed-rate mortgage ends, there are three things you can do. You could stick with your new interest rate, switch to a different product with the same lender, or remortgage onto a new deal with a new lender.

Let’s explore the pros and cons of each option below.

​​1. Remortgage your home

Many people choose to remortgage their property when their fixed-rate deal ends. A remortgage involves replacing your existing mortgage product with a new deal by switching to a new lender.

Reasons to remortgage:

• To get a lower interest rate and reduce monthly payments
• To fix your rate again for 2, 3 or 5 years
• To release equity for home improvements, debt consolidation or family support
• To shorten your term and save on long-term interest

If your home has risen in value or you’ve paid down some of your mortgage, your Loan-to-Value (LTV) will be lower, which could qualify you for a cheaper rate.

Here’s an example: If your home’s value has risen from £250,000 to £300,000, and your mortgage balance is now £255,000, your LTV has dropped from 90% to 85%,  potentially unlocking better rates and saving you money.

The remortgaging process is very similar to applying for a mortgage. The lender providing the new mortgage will carry out a series of checks to assess your affordability and decide how much to lend you. 

For example, you’ll need to provide payslips or tax returns, bank statements, and other financial documents. The lender will also carry out credit checks before deciding whether to offer you a new mortgage deal.

Learn more: 5 Reasons Why You Should Remortgage Now

2. Switch to a different product with the same lender

If you’d like to get a lower interest rate but don’t want to go through the remortgaging process, your lender might let you do a ‘product switch’ or ‘product transfer’ instead — as long as you don’t want to change mortgage providers or borrow more money. 

A product switch/transfer tends to be more straightforward than a remortgage. There are unlikely to be any credit searches or affordability checks, so you won’t need to spend ages rummaging around for the right bank statements, bills and payslips. 

If your circumstances have changed, such as you’ve become self-employed or you’re on maternity leave, this could be a way to secure a better rate without the stress of reapplying from scratch. It could also save you money in valuations and legal fees. However, you may miss out on better rates elsewhere and you won’t be able to borrow more money as part of the switch.

3. Stay on your lender’s Standard Variable Rate

You don’t have to remortgage or switch products, as you could stick with your lender’s SVR instead. This option can offer flexibility, as you can leave at any time, but it usually costs more due to SVRs having higher rates typically. Even if you’re happy with the SVR you’re moved onto at first, it could increase later on due to changes to the Bank of England’s base rate. 

Finding a new mortgage deal might sound overwhelming. And if your circumstances have changed since taking out your current mortgage, you might be worried that you can’t afford to remortgage because of affordability. 

If this sounds familiar, let us help. Staying on your lender’s SVR is absolutely not something we would recommend, but we know the remortgage process can seem overwhelming. 
By creating a free Tembo recommendation, you can get a personalised recommendation of how you could improve your affordability. We have a number of tricks up our sleeves to help you boost your affordability and increase your mortgage size or borrowing potential. You may be surprised at just how many options are available to you.

What will my mortgage be after my fixed rate ends?

It depends on what rate you are currently on in comparison to current mortgage rates. If on your last deal you were on a really low rate between 1-3%, your mortgage repayments are likely to go up as you'll need to remortgage onto a new deal. Current rates are averaging 4.96% for a five-year fix, and 4.9% for a two-year fix, so much higher than 1-3%. But if you avoid remortgaging, you'll be automatically placed onto your lender's SVR, which currently averages at 7.27%. 

Remember, you could get lower rates than current averages depending on how much equity you hold in your property - at the moment, a number of lenders are offering sub-4% deals as low as {lowest_rate_rate}%. You could also lower your monthly repayments by choosing a part and part or interest-only mortgage as a short-term solution.

Here are three steps to work out how much your new mortgage repayments will be:

1. Find your figures, such as your current balance and years left on your mortgage.
2. Check your lender’s SVR. You’ll find this on your letters or your online account
3. Estimate the change. As a rule of thumb, each 1% rise in rate costs ~£55–£65 per month per £100,000 (20–25-year term).

For example, if you borrowed £150,000 with a 30 year term and 3% interest rate fixed for 2 years, when your fixed period ends you may have around £143,640 remaining on your mortgage.

If you fixed it for 5 years, you may have around £133,356 remaining. 

Once the fixed rate ends, you’ll start paying your lender’s Standard Variable Rate (SVR) unless you switch to a new deal. You’ll then continue to pay your outstanding mortgage balance at the new interest rate, which could result in a change in your monthly repayments. 

Here are 3 steps to work out how much your new payments will be if you go onto your lender’s SVR.

1. Find your figures, such as your current balance and years left on your mortgage.
2. Check your lender’s SVR. You’ll find this on your letters or your online account
3. Estimate the change. As a rule of thumb, each 1% rise in rate costs ~£55–£65 per month per £100,000 (20–25-year term).

How soon can you remortgage before your fixed rate ends?

Technically, you can remortgage your property at any time - even if you’re in the middle of a fixed-rate deal. Most people start looking for a new deal up to six months before their current rate ends. This gives you plenty of time to compare mortgages from a wide variety of lenders and decide what’s best for you. You can then lock in a deal before your current one ends. When your current deal finishes, you’ll move automatically onto your next one!

If you remortgage through Tembo, for example, we’ll help you lock in a remortgage up to 6-months before the end of your current deal. If interest rates go down during that time, we can cancel the old application and submit a new one at no extra charge through our free rate checking service. If rates go up, then your interest rate will be safely locked in. All you need to do is create a free Tembo plan to get started.

Remember, if you choose to leave your fixed rate deal before it finishes, you may have to pay early repayment charges (ERCs), exit fees and other mortgage-related costs. These fees can sometimes eat into the savings you’ll make from switching to a new mortgage, but this won’t be the case for everyone. Some borrowers will save so much money by remortgaging that the fees barely make a dent in the savings. 

Plus, you might not have to pay any fees at all. Some lenders are willing to be flexible, letting borrowers remortgage anywhere between three-six months before the end of their fixed-rate deal, without any charges.

Is it better to have a 2-year or 5-year fixed mortgage?

There’s no single right answer. It depends on your circumstances and how much flexibility you want.

• 2-year fixes often have lower rates and give you the flexibility to switch sooner if rates fall
• 5-year fixes offer stability, locking in your payments for longer, but can come with higher early repayment charges if you move or refinance early

If you think rates might fall, a shorter fix could make sense. But if you value certainty and want predictable payments, a 5-year fix might give you peace of mind. Seeking advice from a trusted, expert mortgage broker can help you make the decision on whether a 2-year or 5-year fixed rate deal is right for you.

If you need to sort out a remortgage but have been holding off because you're hoping mortgage rates will come down, take advantage of our free rate-checking service. Arrange your remortgage with our award-winning team 3-6 months before your fixed-rate deal ends, and if rates come down in that time, simply ask your dedicated advisor to reapply for you - at no extra cost!

You'll benefit from having your remortgage sorted, and if rates do go down, you can still benefit from a better deal. Plus, by locking in a deal earlier, you can protect yourself from rate rises - the rate you lock in will be the highest rate you pay! Get started here