Your Fixed-Rate Deal is Ending: Valuable Advice from a Mortgage Expert

Miller Metcalfe posted on 23rd June 2023

Following a meeting with members of the Monetary Policy Committee, the Bank of England has made the decision to raise interest rates by 0.5 percent. This adjustment brings the base rate to a total of five percent.

Many homeowners whose mortgage deals are due to end may find themselves uncertain about the next steps to take.

According to the online comparison site Money Expert, 700,000 fixed-rate mortgages are coming to an end in the second half of 2023. Amidst this situation, a mortgage expert has stepped forward to provide guidance on the necessary steps homeowners should take when their fixed-rate mortgages are nearing their end.

Should I fix my mortgage or choose a variable rate?

Currently, the average two-year fixed-rate mortgage stands slightly above 6 percent, while a five-year fixed deal averages around 5.67 percent, as reported by Money Expert.

“There’s potential to secure a lower rate next year by opting for a variable rate mortgage now and fixing once the base rate (hopefully) falls,” the expert says.

“If you opt for a variable-rate mortgage, your monthly payments will fluctuate in line with any base rate changes. This leaves you at risk of even higher monthly repayments if the base rate rises even higher in the coming months.

“For this reason, you should only choose a variable-rate mortgage if you’re financially able to take on the risk of further rises this year. If not, you may be better off fixing your mortgage and benefitting from the reassurance of consistent payment and protection from further rises.”

How can I decrease my monthly payments?

Following the recent increase in interest rates, which has led to higher repayments, many individuals with mortgages are eager to explore ways to decrease their monthly payments.

Liz says: “Spreading out what you owe over a longer period of time means you’ll reduce your monthly repayment, but pay more interest over the long-term.

“This is often done by homeowners who want to take on more borrowing from your current mortgage lender to fund things such as home improvements, but don’t want to remortgage their home or switch to a different lender.

“You will be able to cut back your terms at a later date once rates become more affordable, should you so choose. It’s worth ensuring that your credit score is in good shape and that the value of your home has increased beyond the original mortgage amount you borrowed (equity).

The expert added: “You may be entitled to a mortgage payment holiday if you find yourself struggling to keep up with your mortgage repayments. Not all lenders offer payment holidays, so it’s worth checking your contract or calling to find out if it’s an option.

“Lenders will take your financial circumstances into account and are more likely to offer mortgage payment holidays to those who have overpaid their mortgages in the past. They will also consider changes of circumstances to your household income such as redundancy, illness or maternity leave.

“Mortgage payment holidays are great to relieve some of the financial difficulties you might be experiencing in the short term, often lasting between one and six months.

“Once the payment holiday ends, your repayments will be higher as the interest will continue to rack up on the outstanding balance of the mortgage, so it’s worth ensuring you’ll be able to afford the costs later down the line.

“Mortgage payment holidays will also affect your credit score, which might make applying for credit more difficult in the future.”
Liz Hunter, director at Money Expert

*Information taken from*: https://www.manchestereveningnews.co.uk/news/property/mortgage-experts-crucial-advice-what-27176176

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Your Fixed-Rate Deal is Ending: Valuable Advice from a Mortgage Expert

Should I fix my mortgage or choose a variable rate?

How can I decrease my monthly payments?

Miller Metcalfe

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