What To Do If Your Fixed-Rate Mortgage Is About To End?

Homeowners who have been on a fixed-rate mortgage over the last few years will have been able to avoid the steep rise in interest rates. However, if their term is about to come to an end, they are likely to be worried about affording the new steep rates. 

Indeed, UK Finance recently revealed the number of homeowner mortgages in arrears amounted to 93,630 during the third quarter of 2024, demonstrating that many households are struggling to pay their mortgage due to the high rates.

Here are some tips on what they can do to continue paying their home loan.  

Plan ahead

The current Bank of England base rate is 4.7 per cent, but this could easily increase before your mortgage is due to end. Therefore, homeowners are advised to start looking for a new deal between three to six months before the term expires.

This avoids the loan reverting to the Standard Variable Rate (SVR), which is dependent on the base rate, and could see monthly repayment figures soar.

During this time, it is worth making sure your credit score is good by repaying any loans and paying credit without delay. This will improve your mortgage credentials and enable you to get a better deal from another lender. 

According to Kit Sproson on MoneySavingExpert: “Being proactive could generate a lot of savings in the long run.”

Reduce expenditure

It is also worth being prepared for your mortgage repayments to significantly increase with a new deal.

In fact, the Financial Stability Report from the Bank of England stated that some borrowers on a fixed rate could see their charges increase by as much as £500 per month when their product term ends.

This is particularly if they have had their mortgage fixed since before rates began to rise. 

Therefore, it is worth reducing expenses now to be able to afford this increase in mortgage expenditure. 

For instance, homeowners could lower their media charges, such as internet connection and streaming services; make their house more energy efficient to reduce fuel bills; and cancel any unnecessary subscriptions like magazines or a gym they do not regularly attend. 

This will help them find the extra few hundred pounds they will need every month on a new tariff. 

Use their savings

Another option is to use their savings to repay some of what they owe the bank. If they can lower the amount they need to borrow, this can have a big impact on their monthly repayment. For instance, if they have £100,000 remaining on their loan, they could put in £10,000 of their savings to reduce their mortgage by a tenth. 

However, it is important to check the terms and conditions of their loan to see if there are any repayment penalties and whether these are worth incurring to save money on their mortgage.

Start searching for deals

It is always difficult for homeowners to know whether to find a fixed rate mortgage now and lock in the price in case the rate increases before their product expires or wait just in case the rate drops.

The Bank of England reduced its rate last year and could lower them further over 2025. Indeed, Santander UK’s Frances Hacque told Money Week: “Our own forecasts continue to expect a further four cuts over the course of this year, with base rate ending the year at 3.75 per cent.”

However, this is not a guarantee and homeowners who would not be able to afford it if the base rate suddenly rose might be best fixing a rate in advance for their own financial security. 

Speak to an advisor 

The best thing to do is talk to a mortgage advisor who can look at your finances and tell you the best course of action to take, according to predictions of the market.