When your fixed rate ends, your lender moves you onto its standard variable rate (SVR) unless you choose a new deal. An SVR usually costs more than the deals lenders offer, so doing nothing can raise your monthly payment straight away.
Your three options
- Stay on the SVR. You pay your lender's variable rate, which the lender can change at any time. Most SVRs have no early repayment charges, so you can overpay or leave whenever you like.
- Switch to a new deal with your current lender. Lenders call this a product transfer, and it often involves fewer checks than moving lender.
- Remortgage to a different lender. Another lender may offer a better rate, but it will check your income and spending again and may charge fees.
Start about six months early
Many lenders let you choose a new deal up to six months before your current one ends. Starting then gives you time to compare offers and to avoid paying the SVR in the gap between deals. A mortgage broker can compare lenders for you.
What a higher rate does to your payment
When your rate changes, your lender recalculates your payment on the balance you still owe over the rest of the term. Take a £200,000 mortgage over 25 years, fixed at 4.5% for two years. After those two years you owe about £190,935, and your new rate sets your payment:
| New rate | Monthly payment | Change |
|---|---|---|
| 4.5% (no change) | £1,111.66 | £0 |
| 5.5% | £1,220.63 | +£108.97 |
| 6.5% | £1,334.76 | +£223.10 |
| 7.5% | £1,453.76 | +£342.10 |
Overpay when you switch
Early repayment charges usually end with the deal, which makes the switch a cheap moment to pay a lump sum. On the same £200,000 mortgage, if you pay £10,000 as you move onto a 6.5% rate, you clear it 2 years and 6 months sooner and save £30,742 in interest. Ask your lender whether you can make the payment before your new deal's overpayment limits begin.
If the new payment is too high
You can ask your lender to lengthen the term. A longer term lowers each payment but raises the total interest you pay, and lenders limit how old you can be when the mortgage ends.
This guide gives general information, not personal financial advice. For help with your own situation, speak to a regulated mortgage adviser or MoneyHelper, the free government-backed guidance service. Our independent help page lists other free services.