Be prepared
About 1.8m fixed-rate mortgage deals are due to end in 2026, and most of these borrowers will need to get a new home loan. If that includes you, but you are not sure when your deal expires, dig out the details.
Interest rates have been on a rollercoaster ride since late 2021, and many of those coming off five-year fixed deals will face a jump in payments when they switch to a new product. By contrast, borrowers whose two-year deals are ending will be able to save hundreds of pounds a month.
More Bank of England base rate cuts are anticipated this year, which could translate into further reductions in the cost of new deals. The next interest rate announcement is on 5 February.
Some will want to fix again for the payment security, but the potential for further rate cuts means others might favour a base-rate tracker deal. Clearly, a lot depends on what happens with interest rates. The Guardian and other news outlets will give you the latest on what economists are forecasting in terms of future rate movements. But ultimately, no one knows for sure what will happen to rates in future, particularly in these turbulent times.
If you haven’t remortgaged for a while, your home may well have gone up in value, meaning you will qualify for a lower loan-to-value (LTV) band, which will give you access to better deals. If you plan to stay with your existing lender, they will hopefully be able to give you an estimated valuation. If you plan to switch to another lender, you will need to make an assessment of what your property is worth. Check recently sold price data for your area on websites such as Rightmove and Mouseprice.
Don’t sit on the SVR
If you don’t arrange a deal to start when your existing one ends, you will usually go on to your lender’s standard variable rate (SVR).
This can usually be set, and moved, at the lender’s discretion. The average SVR is 7.25%, according to the financial data provider Moneyfacts, with some lenders charging more than that. Yours is likely to be higher than the rate you have been paying up to now.
It might be tempting to stay on the SVR while you see what is happening with interest rates, but mortgage brokers say there are very few scenarios where someone should stay on the SVR for longer than a few months.
Someone with a £250,000 mortgage could save more than £500 a month with a deal at 3.65% rather than paying an SVR of 7.25%.
Situations where it may be better to stay on the SVR might include if you are coming towards the end of your mortgage, or you only have a very small balance remaining. Arrangement fees for a new loan of between £1,000 and £2,000 are not uncommon, and if your mortgage is small, the costs of taking a new deal might be bigger than any saving.
Ask your current lender …
Typically your current lender will write to you about three or four months before your deal expires, says David Hollingworth of the broker L&C Mortgages. It will usually offer you a choice of products – perhaps including a two-year fix and a five-year fix, and/or maybe a deal with a fee, and one with no fee to pay. Some lenders offer the same products to existing customers that they offer to new ones, while others will have deals exclusively for existing borrowers.
Taking a new deal offered by your current lender – known as a product transfer – will be attractive to some as it will be quicker and less bother than remortgaging to a new provider.
There will also be less form-filling and it will require a lot less in the way of affordability checks, says Hollingworth. By contrast, a new lender will probably ask lots of questions about income and outgoings, and want to see payslips and bank statements, though this will vary depending on individual circumstances.
Some lenders charge fees to value your property (a valuation fee) and/or for legal work. If you stick with your existing lender you will avoid these.
… but shop around, too
There are now more than 7,100 different mortgage products on sale in the UK – the highest figure since 2007, says Moneyfacts. So it is worth comparing the deals your lender offers with its rivals.
Often lenders throw in free valuations and legal services.
It’s not hard to do your own research: Moneyfacts and MoneySavingExpert (among others) publish comprehensive, regularly updated best-buy tables on their websites.
Consider using a broker
A mortgage broker can help you compare the different offers, look at your individual circumstances before making a product recommendation, and handle the paperwork. Also, some deals are only available from a broker. If you are thinking of using one, check they are able to look at all mortgage products available to brokers (known as a “whole of market” broker) rather than being tied to just one or a few lenders.
Check if they charge a fee. There are a number of firms that don’t charge a broker fee: one of the biggest is L&C Mortgages. All brokers receive a payment from the lender when a mortgage completes, which is how the no-fee firms make their money.
Weigh up rates
The fixed rates on offer are at their lowest level since 2022. If you are in the market for one, you need to decide whether you want one lasting five years or more on the basis that this offers payment stability for longer, or a shorter-term deal so you are free to move again soon if interest rates fall or your circumstances change.
There is now not a big premium to pay for taking a longer-term fix. At the time of writing, the best fixed rates for those remortgaging were around the 3.64% (two-year) and 3.70% (five-year) mark.
Some borrowers will be considering a base-rate tracker deal so they can benefit from lower payments in future, assuming we get more rate cuts. With a tracker, the rate moves down, or up, in line with the official base rate.
But as well as offering certainty, fixed rates are typically cheaper than trackers at the moment. At the time of writing, the best-buy tracker rates for those remortgaging were priced at about 3.90%.
“Currently, fixed rates are still typically a bit lower than the pay rate on a tracker,” says Hollingworth. But as the Bank of England base rate edges down, that margin is narrowing. He says we may see more demand for trackers if the messaging implies “more rate cuts to come”.
Trackers are far more likely to come without any early repayment charges, which may appeal to – for example – those in line for a bonus or inheritance fairly soon, says Hollingworth. This can allow you to hedge your bets: “Trackers can give more flexibility, plus the promise of further rate cuts.” But bear in mind that switching at any point could mean paying fees.
Reserve a deal now
Remortgage offers are typically valid for up to six months, so if your deal is ending in four or five months’ time, you can reserve a loan now and wait to see what happens.
If the cost of new deals has come down, which many would argue seems likely, you are not committed to that mortgage offer and can enquire about switching to a lower rate – and take your business elsewhere if necessary. (In most cases the product fee often attached to a mortgage is paid on completion, so many people will not have stumped up a fee in advance which they then might be at risk of losing.)
If rates have risen, you have locked in at a lower rate.
Unlock cash if you need it
For some, the need to finance work such as a loft conversion will be the trigger that has prompted them to remortgage. Others will be remortgaging anyway but will use this as an opportunity to borrow a bit more to finance home improvements (or something else).
For those in the first group who don’t have to remortgage, borrowing more from your existing lender might be the cheapest option. Ask your lender; not all will allow a further advance.
