After the fixed term finishes?

[freetoagoodhome]

This is probably a really thick question, but one I need answered anyway!

When you take out a mortgage for a fixed term, once that fixed term ends, I know the rate can vary. Looking on some calculators just now, the rates and therefore monthly payment take quite a jump (when calculating on my likely budget/circumstances). If you change your mortgage at that time, is it so that you can keep your rate as close to what the original fixed term was, or will any change still be quite an increase in rate at that time? (Hypothetically speaking, brexit uncertainty aside)

Not sure I've explained this clearly. Does anyone know what I mean?

Nope. You've not explained well at all. Is the question - what happens when my fixed rate ends? The answer: you either stay with your current mortgage provider and switch to their standard rates (usually £££) or you ship around for a new deal. No way of knowing what the rates will look like when your fixed term ends, but they will likely be higher than today. You would have paid off more of the house (and hopefully the value would have increased a bit) so you might have a higher LTV to help you get a good deal.

I know those are the options when the fixed rate ends.

But for example, say my 2year fixed rate is 1.69% then rising to a variable of 4.75%. I decide to shop around. Am I shopping around for something similar to the 1.69% or is it only possible to get such a low rate at the start of the original mortgage? Will any change in mortgage still be nearer the 4.75%? Can you just keep changing to a new low fixed rate every 2/3 years?

Yes you shop around again for best deal. Whilst mortgage rates may have changed, your loan to value ratio will have changed as you have paid down your mortgage over your fixed term.
You can look at Mortgage amortisation calculators to work out how much your mortgage will be at the end of the fixed term.
Then you remortgage that amount at whatever the best fixed rate is for how ever many years you want.

The 4.75% isn't meant to be a prediction of the typical interest rates when the fixed period ends.. its usually the banks current SVR ie standard variable interest rate as of right now (there will be loss of small print about interest rate changes blah blah). If the interest rates goes up 1% between now and when your fixed term deal ends then the variable rate they'll move you to is closer to 5.75%.

Basically banks won't commit to what the fee will look like at the time that the deal ends. If you want to guarantee a longer period of interest rate then fix for longer.

And yes you absolutely should shop around every time your fixed period ends - the SVR rates are usually waaay above the fixed term rates

Thank you. This was what I was wondering - are people paying these 4.75% rates or is everyone paying nearer the 1-2% as they have moved/changed again after the end of the fixed rate, and to another fixed rate.

Mine is currently 5 year fixed, but quite a high initial rate, albeit a tiny mortgage.

I'm just trying to figure out for when I may get a substantially bigger mortgage.

Ours has stayed around 2.5% after re-fixing. We shopped around but decided to stay put in the end.

@Peachpebbles so how did you manage that? Do you mean you reduced with the same provider, but they were able to offer you that rate?

All the calculators I use, they rate jumps significantly after the fixed rate and I'm then thinking can I afford that extra £150 - £200 a month? So are those really not worth going by?

The options aren't only to go onto your mortgage lender's standard variable rate or move your mortgage elsewhere - your mortgage company might offer you another fixed term deal - you can just switch to that without going through a mortgage revaluation and application process. We did that in the past a couple of times. I checked other rates available and financially it made better sense to stay put on a new deal. Always ask your current lender what they can offer you too.

it depends - over the last 10 or so years, fixed rate deals have been low, so most people have been able to go onto another fixed rate around the same as the old (either with new or same mortgage company).
You should however budget for higher than the SVR. In 1993 (within a 25 year term) average rates were around 8%.

My first mortgage was at around 8% and repayments got cheaper as the rate came down. I think we can safely say that isn't going to happen anytime soon.

Thank you. This was what I was wondering - are people paying these 4.75% rates or is everyone paying nearer the 1-2% as they have moved/changed again after the end of the fixed rate, and to another fixed rate

Most people will shop around and fix again.

However, some people will not be able to and will be stuck on the SVR - people in negative equity, or people who’s circumstances have changed (2 wage earners reduced to one because off illness or childcare or something, or gone self employed and no accounts history etc)

Our initial FTB fixed rate was 3.74%, went on to Nationwide's SVR of 4.29% (I think) - took out a new product with same provider (not a remortgage, no fees), now on 5 year fixed at 1.89%.

One thing to remember is that with a few years of repayments you will have reduced the amount you owe on the mortgage and the value of the place may have increased meaning your LTV rate may have improved and you can actually get a better interest rate in some circumstances, especially whilst rates are generally low.