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Options for homeowners coming to the end of their fix soon

Journalist: Paloma Kubiak, YourMoney.com

ended 28. September 2022

Good morning,

I'm looking to write an article covering practical tips/options for homeowners coming to the end of their mortgage fix soon, ie amid all the market turmoil, product withdrawals and higher interest rates.

I think some of the options include: get a mortgage offer up to 6 months before the end of the deal, consider overpaying to move up LTV band to get a better rate when remortgaging, do nothing and revert to SVR (higher cost than a fix), consider ERC to lock in a ‘cheaper’ rate now than at the end of your deal etc.

Hoping mortgage experts can comment on these options and expand on them, plus offer further tips or reassurance to homeowners. Many are very concerned that they'll be unable to afford their mortgage. 

Meanwhile, a brief idea about what your clients are requesting/what you are telling them etc would also be helpful. 

Quite a quick turnaround for this but hope the community can help.

Many thanks as always, Paloma Kubiak.

6 responses from the Newspage community

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Editor
Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
In a rising rate environment, and most mortgage holders facing inevitable payment shock, it is time to look at wider household economics. Mortgage is not the only debt that people have consider and an upsurge in debt refinancing echoes the sentiment that consolidation is a good way to provide a substantial buffer against rising costs. This week, we have seen a legal professional carrying £182,000 of unsecured debt, and restructuring reduced outgoings by over £3,000 per month. Another business owner in the Midlands has reduced outgoings by £1,850 through the same principle. Investment in green tech such as solar is also a good idea. It may appear counter intuitive to be raising mortgage debt at this time, however the cost to install a 6KW solar system, batteries and all, would be well offset against the energy cost savings. In a nutshell, everyone's situation is different and taking a wider household view on outgoings could well provide solutions a simple rate swap couldn't.
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Mike Staton
Director at Staton Mortgages
Unfortunately there is no quick fix at the moment, paying a chunk of your mortgage off to get to the next LTV is a risk as their simply are just no great deals out there. I would definitely be looking 6 months in advance to lock into my new rate if i am due to come out of my fixed rate. I have seen a varied amount of customers at the moment, those who want to fix for security & those who feel they want to weather the storm and hope the rates calm down. There is no right or wrong answer at the moment, you just need to make sure that you get advice and that you are comfortable with the advice you are taking. We are all in the same storm but in different ships. Damage limitation may be good for people experiencing financial difficulty at the moment. Increasing your mortgage term to reduce costs in the short term may help today to pass the storm but may have longer term implications on your mortgage
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Graham Taylor
Managing Director at Hudson Rose
The first thing to remember is not to panic - you cannot affect what the market does but you can put yourself in the best position to play the game. Getting organised is key - with the ability to secure a mortgage rate up to six months in advance being the most important weapon in your arsenal. Secondly it is good practise to 'wargame' what your situation might look like at various interest rate levels - a decent broker will be more than happy to do this for you. You should then look to see if you can save any money before your mortgage costs increase to help ease the transition- not an easy task with todays rising prices.
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Sabrina Hall
Mortgage Adviser & Protection Adviser at Kind Financial Services
The single most important tip is to plan well ahead and get yourself in a position where you can remortgage 6 months ahead of your current deal ending. This means that the lender will honour the rate you applied for even if the rates had gone up since then. Another thing that your adviser will explore is that if you are close to a threshold where rates get cheaper then making an overpayment might be beneficial. So for example the rates can differ between a 60% deal and a 61% deal so if that means paying a small overpayment to benefit from the lower rate it might be worth considering if it's an option for you.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Can you extend your repayment term to reduce your repayment? Many people think of their mortgage as a very static thing, but it can be a very flexible and powerful financial planning tool. At the moment with rates rising one of the options some people may have is to extend the overall mortgage term, so reducing their monthly commitment to the lender to a more comfortable level. The key think here is to then reduce the term again at future mortgage reviews if and when rates fall, or you receive a pay rise.
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Matthew Poole
Director at Poole Family Financial
If the 'experts' are to be believed then the base rate will rise to around 6% by Spring 2023. Leaving almost 2 million households that have fixed rates ending next year, potentially exposed. I would encourage anyone with a mortgage rate due to expire in the next 12 months to review their circumstances now. Yes, you can typically secure a new interest rate up to 6 months in advance with the majority of lenders so you may need to pay an early repayment charge if you redeem your mortgage early. These can be factored into your new mortgage borrowing. Let's say you have a fixed rate ending in September 2023 and you're concerned about current rates. Securing a new deal now will take you to around the start of April 2023, if you redeem the mortgage then - you'll need to pay an early repayment charge, which you can factor into your new borrowing. You can then review the market again before completing to take stock of interest rates in Spring 2023. If they are comparable to what they are now then you could reapply for a new mortgage to take you to the end of your fixed rate in September 2023. If they have sky rocketed, you can complete on the rate already secured to avoid the peak in interest rates that we may see next year. it's an unsettling time and we have seen a flurry of lenders pulling out of offering mortgages to new customers. This is purely to give the banks time to re price their offerings. The fallout of the mini budget and talk of an emergency Bank of England base rate rise has caused lenders to take a step back. They are finding it hard to price their fixed rates due to the uncertainty, they haven't withdrawn because they don't want to lend. Yes the rates are likely to be higher and this is where the advice of a good broker is worth its weight in gold.