Get ready
About 1.8 million fixed-rate mortgage transactions are scheduled to close in 2026, with most of these borrowers needing to take out new home loans. If this includes you but you’re not sure when the deal expires, dive deeper into the details.
Interest rates have been on a rollercoaster since the end of 2021, and many people on five-year fixed contracts will see their payments skyrocket when they switch to a new product. In contrast, borrowers who reach the end of a two-year contract could save hundreds of pounds a month.
More base rate cuts are expected from the Bank of England this year, which could lead to a further reduction in new transaction costs. The next interest rate announcement is on February 5th.
Some will want to modify it again for payment security, but the possibility of further rate cuts means others may prefer the basic rate tracking deal. Obviously a lot depends on what the interest rates are. The Guardian and other news outlets will provide you with the latest information on what economists are predicting about future interest rate movements. But ultimately, no one knows for sure what will happen to interest rates in the future, especially in these turbulent times.
If you haven’t remortgaged in a while, the value of your home may have increased. This means you will qualify for a lower loan-to-value (LTV) band, giving you access to better deals. If you plan to stick with your existing lender, they will be able to give you an estimated value. If you are planning to switch to a different lender, you will need to assess the value of your property. Check websites such as Rightmove and Mouseprice for recent sales price data in your area.
do not sit on SVR
If you don’t arrange for the deal to come into play when your existing deal closes, you’ll usually fall into the lender’s Standard Variable Rate (SVR).
These can generally be set and moved at the lender’s discretion. The average SVR is 7.25%, with some lenders charging more, according to financial data provider Moneyfacts. Your rates will likely be higher than what you’ve paid so far.
It may be tempting to stay in an SVR while you see what’s happening with interest rates, but mortgage brokers say there’s rarely a scenario where someone would need to stay in an SVR for more than a few months.
Someone with a £250,000 mortgage could save more than £500 a month on a 3.65% SVR instead of paying 7.25% SVR.
Situations where it may be better to keep an SVR may include if your mortgage is nearing maturity or if you have a very small remaining balance. Arrangement fees for new loans of between £1,000 and £2,000 are not uncommon, and if your mortgage is small, the costs of securing a new deal may outweigh your savings.
Contact your current lender…
Typically, your current lender will send you a letter about three to four months before your deal expires, says David Hollingworth of broker L&C Mortgages. There are usually a variety of products to choose from, including 2-year modifications and 5-year modifications, and/or commission and no-fee transactions. Some lenders offer the same products to existing customers that they offer to new customers, while others offer deals just for existing borrowers.
Taking advantage of a new deal offered by your current lender (known as a product transfer) may be attractive to some as it will be quicker and less hassle than remortgaging with a new provider.
Hollingworth says there will be less form filling and much less verification of affordability required. In contrast, a new lender will ask a lot of questions about your income and expenses and will want to see pay stubs and bank statements. However, this may vary depending on your individual circumstances.
Some lenders charge a fee to appraise your property (appraisal fee) and/or a fee for legal work. You can avoid these problems if you stick with your existing lender.
… But you can also shop nearby
There are currently more than 7,100 different mortgage products on sale in the UK, the highest figure since 2007, Moneyfacts says. It is therefore worth comparing the deals offered by lenders with those of their competitors.
Often, lenders will provide free evaluations and legal services.
It’s not difficult to do your own research. Moneyfacts and MoneySavingExpert (among others) publish comprehensive and regularly updated best buy tables on their websites.
Consider using a broker
A mortgage broker can help you compare different offers, look at your individual situation before recommending a product, and help you handle the paperwork. Additionally, some transactions are only possible through brokers. Rather than being tied down to one or a few lenders, make sure your broker (known as a “whole market” broker) can view all of the mortgage products available to you.
Check to see if any fees apply. There are many companies that do not charge broker fees. One of the largest companies is L&C Mortgages. All brokers receive a payment from the lender when a mortgage is completed, which is how the commission-free company makes money.
weight measurement fee
The fixed interest rate on offer is the lowest since 2022. If you’re looking to buy one, you’ll need to decide whether you want an option that will last five years or more, or a shorter-term deal, based on the fact that it gives you payment stability for a longer period of time so you can move on again as soon as interest rates drop or your circumstances change.
Now there’s no big premium to pay for a long-term fix. As of this writing, the best fixed rates for remortgages were around 3.64% (2 years) and 3.70% (5 years).
Some borrowers will consider base rate tracking deals so they can benefit from lower payments in the future, assuming we cut rates further. When you use the tracker, your rate will be lowered or higher based on the official base rate.
But as well as providing certainty, their flat rates are usually cheaper than your current tracker. As of this writing, Best Buy’s tracking rate for remortgages is set at around 3.90%.
“Right now, the flat rate is typically a little bit lower than a tracker’s salary,” says Hollingworth. However, as the Bank of England (BoE) lowers its benchmark interest rate, that margin is narrowing. He said there could be more demand for trackers if the message hints at "more rate cuts to come.”
Trackers are much more likely to be released without early repayment costs, which could appeal to people who will soon receive a bonus or inheritance, for example, says Hollingworth. This allows you to hedge your bets. “Trackers can offer more flexibility and promise additional rate reductions.” But keep in mind that if you switch at any point, you’ll have to pay a fee.
Book your deal now
Remortgage offers are usually good for up to six months, so if your deal closes in four or five months, you can book your loan now and wait to see what happens.
If the new transaction costs have been reduced, as many claim, you may not be committed to that mortgage offer and may inquire about switching to a lower rate, taking your business elsewhere if necessary. (In most cases, the product fee attached to the mortgage is paid upon completion, so many people will not pay a fee up front that could put them at risk of loss.)
If interest rates have risen, you are locked in to a lower interest rate.
Unlock cash when you need it
For some people, the need to finance work such as a loft conversion will be the trigger for a remortgage. Others will remortgage anyway but will use this as an opportunity to borrow a little more to finance home improvements (or something else).
For the first group who do not need a remortgage, borrowing more money from their existing lender may be the cheapest option. Contact your lender. Not everyone will allow further progress.