A fixed-rate mortgage is where the rate stays the same for the specified deal period. Your payments remain stable for this time; this is reassuring as you shouldn’t face higher costs if interest rates rise. But it also means you don’t benefit from lower payments if rates fall.
Your fixed-rate mortgage is ending – here’s what you should do, according to Claire Flynn, Confused.com mortgages expert “Mortgage rates have risen significantly over the past couple of years. So, those looking to remortgage or move home are naturally likely to be worried about the impact on their payments. If you’re on a fixed-rate mortgage that’s ending, here’s what you should do:
Look into remortgaging options as early as possible. While you’re likely to face a much higher rate than you’re currently on, remortgaging to a new deal is still expected to save you money. That’s compared to falling onto your lender’s standard variable rate. Mortgage offers are usually valid for 6 months, so if your current deal expires within that time, look into remortgage options now. You can secure a deal and switch when your current deal ends, avoiding the standard variable rate and any early repayment charges.
Consider overpaying your current mortgage if you can. If you’re on a low rate and can afford to overpay, this helps you pay off your mortgage faster. It might mean you can access a lower loan-to-value ratio when you remortgage, which usually means better rates. But lenders typically limit how much you can overpay before you face fees, so check your terms and conditions first.
Look at remortgaging to an offset mortgage. With an offset mortgage, your mortgage and savings accounts are linked. Your savings are used to offset the mortgage amount you pay interest on. If you have a mortgage of £200,000 and savings of £50,000, you only pay interest on £150,000 of your mortgage. If you have a decent amount in savings, an offset mortgage might help you reduce your interest payments. But there’s not a massive selection of offset mortgages on the market, and rates tend to be a little higher with these deals.