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“Hi Visionary Finance, I took out a fixed rate mortgage in 2016 and I know that it will revert to the standard variable rate in October 2021 – what options do I have to avoid my monthly mortgage payment going through the roof?”
The main benefit of choosing a fixed-rate mortgage is that you know exactly what you’ll be paying for a fixed period of time and there are no nasty surprises while you’re within your fixed rate period. It is the most sensible option to go for given that we have had historically low interest rates for over a decade.
However, when the fixed-rate comes to an end and you’re not prepared, you may experience a few nasty shocks.
For example, if your lender’s SVR is 4% and you are ending a two-year fixed-rate 2% mortgage, switching to the SVR means the interest rate you are paying doubles overnight. So if you were repaying a £100,000 mortgage over 25 years, your repayments would rise from £424 (on the fixed rate) to £528 – more than a hundred pounds extra per month! *
First, we recommend that you find out when your fixed rate period is up. Not 100% sure? Get in touch and we can help.
Once you know that you can make some decisions:
The best free mortgage advice for you depends on your answer to the above questions.
One of the benefits of a fixed-rate mortgage is that your monthly payment remains the same. The SVR, as the word ‘variable’ implies, means that the interest rate will usually vary in line with what the Bank of England base rate does.
It will also be a higher rate than you were paying on a fixed fee. If you are in a position to pay off your mortgage earlier than originally thought (maybe due to a redundancy payment, inheritance or windfall) or you are looking to sell your property in the near future then SVR may be for you.
If you prefer the safety of knowing how much your monthly payments will be and not having to allow for fluctuations, then a fixed rate remortgage is probably the way to go.
Lenders are always competing amongst each other for more business and a greater market share. For ease, staying with the same lender will save time and effort – however if your circumstances have improved since you first took out the mortgage, it maybe that better options are available in the market so it is worth exploring the choices.
Using a free mortgage broker offering free mortgage advice is the ideal way to understand and assess your options which may include staying with your current lender or securing a cheaper alternative.
One of the great things about a free and independent mortgage broker is that we can search from over 75 lenders to find the best deal for you. We’ll take into account your circumstances, income / expenditure and lifestyle to find the best option for you going forward. We will also manage the entire process for you and are generally able to secure you with a competitive mortgage deal.
If you would like a free initial consultation to discuss remortgaging, fixed-rate and standard variable rate mortgages, contact us today.