Given today’s current rising cost of living, it’s become even more critical for borrowers to fully consider and research all their options when choosing a mortgage deal.
At present, most mortgages sold in the UK attract buyers with a short-term introductory deal, often referred to as a fixed interest rate. This fixed interest rate typically lasts between two to five years and gives borrowers stability during a set period, as they’ll always know exactly how much money their monthly repayments will be.
Unlike variable mortgages, fixed-rate deals aren’t determined by the Bank of England base rate. So, no matter what happens to the interest rate your monthly payments will stay the same.
Many borrowers often face the difficult decision of whether they should switch their mortgage to a new fixed interest rate or hold out for a drop in the base rate when their current fixed rate ends. Here we discuss the different things you should consider if your fixed-rate mortgage is coming to an end.
The impact of the rising cost of living
Research recently carried out by the Finical Conduct Authority (FCA) predicts that around half of mortgages are currently arranged on fixed rates will expire in the next two years.
In previous years, particularly during the coronavirus pandemic, we saw comparatively low-interest rates on both fixed and variable rates. It’s expected that these borrowers will now see an increase in their mortgage costs when their fixed rate ends as rates have now increased. These borrowers must be aware of all their options to make sure they are switching to a deal that suit’s their circumstances and save’s them money.
What happens if I decide to switch my mortgage?
If you do decide to switch your mortgage and either get a new deal with your current provider or find a different mortgage provider, then it’s often worth using a mortgage adviser to make sure you are getting the best deal possible.
If you choose to switch to a new fixed interest rate mortgage with a different provider there are some additional costs to also consider. Some of these might include:
- Arrangement fee
- Early repayment fee (this can sometimes apply beyond your length of a fixed rate)
- Booking fee
- Valuation fee
- Conveyancing fee
It’s important to calculate if the combined costs of these potential fees outweigh any savings that you might make by switching providers.
Change in circumstances
You must also consider your circumstances- if they have changed this could also affect your credit score and affordability assessment. A change in circumstances might include, having a child, becoming self-employed or taking on new debts.
In these situations, it can always be best to contact a mortgage advisor to help you carefully weigh up your options and get you the best deal.
When is the best time to switch?
It’s often thought that you should start thinking about switching your mortgage around six months before your fixed-rate period ends. If you delay this process, you might be charged additional costs for switching at the last minute, so make sure to check your contract with your current provider.
When agreeing to a new rate, lenders will typically allow you to sign a contract three months before your start paying. This can sometimes be a difficult decision to make as you want to make sure you don’t miss out on a cheaper deal later, so it’s crucial to make sure you’re aware of the current market.
If you are currently in a similar situation and what to get the best fixed-rate mortgage, then contact our expert team of mortgage advisors today!