If your 5-year fixed-rate mortgage ends by December 2025, acting now could save you over £700 monthly compared to your lender's standard variable rate.
With so much competing for our attention whether it's your home life, work commitments, getting the children sorted for sports activities, planning a much-needed holiday and all manner of other things, it's very easy to forget what's going on with your current bills.
It's therefore easy to understand why you might put your mortgage out of sight so that it slips out of mind. However, it's critical that you think about it now because, according to the assessment by the Lloyds Banking Group, you might be able to save some money if your fixed-rate mortgage is coming to an end soon.
135,000 fixed-rate mortgages maturing by end of 2025
Specifically, Lloyds advises that, for anyone who have current fixed-rate mortgages that is maturing before the end of the year, you could avoid considerable additional costs as your mortgage is moved on to a higher rate if you don't do anything to protect it by renegotiating a more favourable deal.
According to Lloyds' analysis, there are around 135,000 5-year fixed-rate mortgages that were taken out in the last three months of 2020 on historically very low rates. They are therefore ready to mature by the end of December this year.
But, because these were generally taken out on very low rates (designed at the time to provide housing market impetus after being in the clutches of the pandemic), without organising a new deal to replace it, the mortgage will default to a new rate that could triple the rate being paid, with the average rate projected to be 6.9%.
How much could you save by remortgaging?
Therefore, remortgaging on to a new fixed-rate deal could mean saving over £700 on average per month than would be the case if no new deal were to be agreed.
The example that Lloyds has given is this:
Real Example: £210,000 Mortgage Over 25 Years
- Original 2020 deal (2.4% fixed): Monthly repayments were £932
- Interest-Only on same terms: £420 monthly
- Standard Variable Rate (6.9%): Monthly repayments jump to £1,361 (increase of £429)
- Interest-Only at SVR: £788 monthly
At the end of their fixed rate deals, these borrowers could see the interest rate they pay almost triple as they move on to their lender's standard variable rate (SVR). Since the average SVR across lenders is around 6.9%, the remaining debt in the example would cause the monthly repayments to increase to a huge £1,361 per month, which would be a rise of £429, while for interest-only loans that figure would rise to £788.
Your remortgaging options explained
As Andrew Asaam, Mortgage Director at Lloyds, comments:
"While interest rates are higher than they were five years ago, for people coming to the end of their current fixed rate, taking early action can help minimise the jump in monthly payments they may be expecting.
"It's never been easier for people to switch lender to get a better deal.
"As well as a range of competitive remortgage products to help borrowers soften the effects of today's higher rates.
"Acting now gives you the certainty of knowing you won't see a bigger rise in your monthly payments than necessary, while still giving you the flexibility to choose another deal if rates continue to drop in the meantime."
So, it makes sense to heed the advice and look at your options to find a better deal than would be the default option, so that you can avoid your monthly repayments increasing to such a degree. Talk to your current mortgage lender to see what they might be able to offer.
Of course, you don't have to go with your current mortgage lender - although, if you find a better deal with someone else that might give you some leverage, but, if such research leaves you feeling cold, you might want to talk to an adviser who will have all the information at their fingertips to find a mortgage with a new rate that best fits your needs.
Need help with remortgage conveyancing?
If you're switching lenders, you'll need legal work handled by a conveyancing solicitor. Homeward Legal offers fixed-price quotes and a 'no completion, no fee' promise.
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