If your fixed rate deal is coming to an end, there is a chance that you could suddenly be facing significantly higher costs, as you return to the lenders Standard Variable Rate (SVR), which would be unwelcome for many homeowners.

Fixed rate deals are specialist products offered by mortgage lenders, whereby the customer seals themselves into a mortgage with a fixed rate, for an agreed period of time – generally two to five years.  The fixed rate offered is usually much lower than the SRV at the time and customers with these can look to be repaying smaller amounts during the period of the fixed rate mortgage.  However, depending upon circumstances, there may be other factors to consider.   Looking at an SRV, the upside of these include:

No early repayment charges. Early repayment charges tend to end with the fixed-rate period. This means that, once you’re on the SVR, you won’t be penalised for making mortgage overpayments. You can usually also pay off your entire mortgage or switch to another deal without incurring an early termination fee.

The interest rate can go down as well as up. Since the rate is variable, there’s a chance it might go down. If this happens, your monthly mortgage repayment may also go down but bear in mind that this is driven by the bank rate set by the Bank of England (BoE) and we are currently experiencing some of the lowest interest rates that we have ever seen. So, it is more likely that the SVR may go up, in which case your mortgage could become more expensive.

The main downside of a SRV is that it tends to be a higher rate than any deal you can get, so as a homeowner you would almost be guaranteed to be winning.

The issue is that if you have a fixed rate deal that is close to finishing, what should you do?  You could:

• Do nothing.  You could simply let the deal end and be automatically switched to the SRV.
• Look for a new deal. There is usually nothing to stop you simply looking for a new deal and locking in to that for the next few years. In doing that, you are assured of your mortgage repayments for the period, and that will allow you to plan with a greater deal of certainty.  If this is your preferred option, there are many different deals out there in terms of both rate and time period, so you are likely to get a good pick of the crop.

A new fixed rate deal may not be the best option for you if you have a relatively small amount of time left on your mortgage or if your financial circumstances have changed significantly and we would should suggest you always seek advice to find the most appropriate deal to your requirements.  You should generally start to look for a new deal around three to five months before your existing one is due to end.

If your fixed rate deal is due to end soon, come and talk to Grange Mortgages to get impartial advice, and to look at your options.