Getting out of a Fixed-Rate

Can you get out of a fixed rate mortgage? And can you re-mortgage a fixed rate mortgage early?  

This is something we get asked a lot, especially with rates changing all the time and people’s circumstances changing. There are occasions where you might want to review your options earlier, especially if you’re currently fixed into a mortgage rate. 

Everything I say today, do check with your mortgage broker because products do vary. They are different depending on the lender and even lenders have their own array of products with different rules on them. But very generally speaking, yes, you can come out of a fixed rate mortgage.

Most, if not all, lenders will allow you to do that. The question is why you want to do it. We’ll look at whether it is cost-effective to do it or whether you have no other option. It’s also important to look at the early repayment penalty. 

The lender will charge you an early exit fee for redeeming that mortgage whilst you’re still fixed in. Usually it’s that fee is a percentage of the balance of the mortgage left. It also depends on how long you’re fixed in for and how far into your fixed rate you are, as well. 

Always seek advice to make sure it’s the right thing for you to do – there might be alternative options. 

What happens when you come out of your fixed rate mortgage?

Your fixed rate deal could be for two years, three years or five years – those are the most common. After that fixed period ends, most of the time what happens is you fall onto the mortgage lender’s ‘standard variable rate.’ 

This interest rate can go up or down as it’s not fixed. There’s no real benefit of being on the standard variable rate unless there are specific circumstances that mean it’s the right thing to do: for example, you’re moving house soon and you don’t want to be tied into a new mortgage product. 

What we generally advise is not to do nothing – try to avoid the lender’s standard variable rate. Very often it is higher than most mortgage products out there. What happens is your fixed monthly payments will end and it’s likely that they will increase. They could be subject to change if the lender puts their rates up or down. 

Instead, you might want to fix your mortgage again or you might want to look at another type of mortgage product. But do try to avoid staying on the lender’s standard variable rate unless there’s a good reason to. 

What are my options when my fixed rate mortgage ends?

This is something we get asked a lot by First Time Buyers. It’s a bit like your car insurance or home insurance – you’ll be shopping around when that contract comes to an end, and it’s no different for your mortgage. 

Let’s say you’re on a two-year fixed rate deal. When that deal ends, if you do nothing, you’ll revert to the lender’s standard variable rate. They’ll contact you ahead of that to remind you that your deal’s finishing and state the rates they are willing to offer you. You usually get that three to six months before your deal ends. 

That’s the time to look at what options there are across the market. There might be a more competitive deal or a more suitable lender available to you. In that case, you would normally remortgage and switch over to them. That’s something you could do yourself, or something that a mortgage broker can help you with. Obviously using a broker saves you time and means that you’re comparing the wider market as well. 

So in a nutshell, you either move on to a standard variable rate, you stay with your current lender on a new deal or you switch to another lender.