What will happen when your fixed rate ends?

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Every month there are hundreds of thousands of people who’s fixed term mortgage deal has ended. For most, if not all of them, their monthly repayments will rise and for some people this increase will be considerable.

When a fixed rate ends, a borrower will automatically move on to a variable standard rate, also known as a SVR mortgage. The interest rate on this type of mortgage is far higher than most fixed rate deals, and can be as much as 5%. A lender can offer a borrower a two-year fixed rate deal at a vary attractive rate of less than 1%, but once the deal ends it can jump up by hundreds of pounds more each month.

SVR mortgages don’t track the bank rate directly, but is set by the individual lenders and can rise and fall at the lender’s discretion. However, they do tend to move more or less in line with wider interest rates as set by the Bank Rate. Therefore if you notice that interest rates are rising, you can expect your SVR to go up too.

When your fixed rate mortgage does come to an end, you can do nothing and stay on the SVR rate, or you could remortgage to a new deal. If you wish to try and remortgage, make sure you look into this before your fixed rate ends so that you have something in place when your deal ends otherwise you could shift to a SVR without knowing.

Make sure you get good advice and use a broker who can compare the whole of the market, rather than sticking to the same lender, as this may not be the best deal available to you. If your property has risen in value since taking out the mortgage you will have more equity and can benefit from more competitive rates.

If you want to make overpayments on your mortgage, you might want to stay on the SVR as there will be no early repayment charges attached. This means you can pay off your entire mortgage without any penalties. In addition, if you have a small mortgage you may find that the fees associated with a new mortgage outweigh the additional repayments if staying on SVR. It’s also worth noting that you will need a good credit score in order to remortgage.

If you are nearing the end of a fixed term mortgage deal and would like to know what your options are contact Derngate Wealth today.

Your home may be repossessed if you do not keep up repayments on your mortgage

– http://www.telegraph.co.uk/personal-banking/mortgages/happens-fixed-rate-mortgage-ends/

 

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