When a fixed rate ends the mortgage does not stay where it is. It moves automatically to the lender’s standard variable rate, which is set by the lender and is usually a good deal higher than the deal you were on. Nobody rings to stop you. The payment simply changes.
It is entirely avoidable, and the avoiding has a timetable.
The timetable
- 01Six months before the end
Start looking. Most lenders will let you reserve a new rate up to six months ahead, and the offer usually holds until it starts. If rates fall in the meantime you can normally switch to the better one; if they rise, you have protected yourself. It is the closest thing to a free option in this market.
- 02Three months before
If you are moving to a different lender, this is the point at which the legal work and the valuation want to be underway, so the new mortgage starts the day the old deal ends rather than a month later.
- 03One month before
Check the new payment, the direct debit date, and that the old lender has been redeemed in full. Most of the time this is a formality.
- 04The month it ends
If nothing has been arranged, the mortgage falls onto the reversion rate. You can still act — there is no early repayment charge once the deal has ended — but you will pay the higher rate for however long it takes.
Your options
Do nothing
The mortgage moves to the lender’s standard variable rate. Occasionally that is a deliberate short-term choice — if you are about to sell, or waiting on something — because there is no early repayment charge on it. As a default it is simply expensive.
Product transfer
Take a new deal with your existing lender. Quick, light on paperwork, no legal work and usually no new affordability assessment. The limitation is that you are looking at one lender’s products rather than the market.
Remortgage
Move the mortgage to a different lender. More involved — a full application, a valuation and legal work, though lenders often cover the legal cost — and it opens up the rest of the market. It is also the moment to borrow more or change the term if you want to.
Worth knowing
If your circumstances have changed — income down, a credit event, a property that has fallen in value — a product transfer may be available where a remortgage is not, because it usually involves no new affordability check. Worth knowing before you assume you are stuck.
Check one thing first: whether your current deal carries an early repayment charge, and on what date it stops. Acting a month too early can cost thousands; acting a month too late costs a month at the reversion rate.
Worth doing at the same time
- •Look at the term. A few years either way changes both the monthly payment and the total interest considerably, and the end of a deal is the natural moment to change it.
- •Look at the balance. If the property has risen in value you may have dropped into a lower loan-to-value band, which usually widens what is available.
- •Look at what else has changed. A new job, a baby, a business, a partner moving in — all of these change what the right answer is, and none of them show up on the lender’s renewal letter.
- •Check your protection at the same time. If the mortgage is changing shape, the cover built around the old one probably needs to as well.