Remortgage From Fixed to Fixed

Why Remortgage From One Fixed Rate to Another?

There are several compelling reasons why homeowners choose to remortgage from one fixed rate deal to another. The most common scenario is when your current fixed rate period is coming to an end and you want to avoid moving onto your lender's standard variable rate (SVR), which is almost always considerably higher.

Here are the main reasons people switch from fixed to fixed:

• Your current deal is expiring — When your fixed rate period ends, typically after two, three, or five years, you will automatically move onto the SVR. This can mean a sudden and significant increase in your monthly payments. By remortgaging to a new fixed rate before this happens, you can lock in a competitive rate and maintain predictable payments.
• You want payment certainty — A fixed rate gives you the security of knowing exactly what your monthly mortgage payment will be for the duration of the deal. This makes budgeting much easier and protects you from any increases in the Bank of England base rate.
• Market rates have dropped — If interest rates have fallen since you took out your current fixed deal, remortgaging could allow you to benefit from a lower rate. However, you will need to weigh any potential savings against early repayment charges if your current deal has not yet ended.
• Your equity has increased — If your property has risen in value or you have paid down a chunk of your mortgage, your loan-to-value (LTV) ratio will have improved. A lower LTV typically gives you access to better interest rates, making it worth shopping around for a new deal.
• You want a different fixed term length — Perhaps you took a two-year fix and now want the longer-term security of a five-year fix, or vice versa. Remortgaging gives you the opportunity to choose a term length that better suits your current plans.

Whatever your reason for switching, the key is to start planning well in advance. Most lenders allow you to apply for a new mortgage deal up to six months before your current one expires, so you can lock in a rate without paying early repayment charges.

When Is the Best Time to Switch Fixed Rate Deals?

Timing is crucial when remortgaging from one fixed rate to another. Get it right and you can move seamlessly from one deal to the next without any gap on the more expensive SVR. Get it wrong and you could end up paying unnecessary early repayment charges or missing out on the best rates available.

The six-month window

The ideal time to start looking at remortgage options is around six months before your current fixed rate expires. Many lenders offer rate locks or mortgage offers that are valid for three to six months, which means you can secure a new deal well in advance and have it ready to start the day your current fix ends.

Why you should not wait until your deal expires

If you wait until the very last moment, you risk running out of time to complete the remortgage process before your fixed rate ends. The process typically takes four to eight weeks, and any delays could leave you on the SVR for a period. Even one or two months on the SVR can cost you hundreds of pounds in extra interest.

Can you switch before your fixed rate ends?

You can remortgage at any time, even during your fixed rate period. However, if you leave before the agreed term is up, you will almost certainly face an early repayment charge (ERC). These typically range from 1% to 5% of the outstanding mortgage balance and decrease as you get closer to the end of the fixed period.

It only makes financial sense to pay an ERC and switch early if the savings from the new, lower rate outweigh the cost of the charge. For example, if your ERC is 2% on a remaining balance of 200,000 pounds, that is a charge of 4,000 pounds. You would need the new rate to save you more than this amount over the new deal period to justify the switch.

Consider the wider market

Keep an eye on interest rate trends and economic forecasts. If rates are expected to rise, locking in a new fixed rate sooner rather than later could save you money. Conversely, if rates are on a downward trend, you might benefit from waiting, though this always carries an element of risk as nobody can predict future rate movements with certainty.

A good mortgage broker can help you assess the market and advise on the optimal timing for your switch. Many brokers will also set up rate alerts to notify you when particularly competitive deals become available.

Understanding Early Repayment Charges and Costs

One of the most important considerations when remortgaging from one fixed rate to another is the cost involved. While the process can save you money in the long run, there are upfront costs you need to factor into your calculations to make sure the switch is genuinely worthwhile.

Early repayment charges (ERCs)

If you remortgage before your current fixed rate period has ended, your existing lender will typically charge an ERC. This is usually calculated as a percentage of the outstanding mortgage balance, and the rate often decreases each year you are into the fixed term. For example:

• Year one of a five-year fix — ERC of 5%
• Year two — ERC of 4%
• Year three — ERC of 3%
• Year four — ERC of 2%
• Year five — ERC of 1%

On a mortgage balance of 250,000 pounds, a 3% ERC would cost you 7,500 pounds. This is a substantial sum and means the new deal would need to deliver significant savings over its term to make the switch worthwhile.

Arrangement fees

Most new fixed rate mortgage deals come with an arrangement or product fee. These typically range from around 500 pounds to 1,500 pounds, though some higher-rate deals have no fee at all. You can usually choose to pay the fee upfront or add it to your mortgage balance, though adding it means you will pay interest on it over the life of the loan.

Valuation fees

Your new lender may charge for a property valuation, although many remortgage deals include a free valuation as an incentive. The cost, if charged, is typically between 200 and 500 pounds depending on the value of your property.

Legal fees

Conveyancing is required to transfer the mortgage from one lender to another. Many remortgage deals include free legal services, but if not, you can expect to pay between 300 and 800 pounds for a solicitor or licensed conveyancer.

Exit fees

Some lenders charge a small administrative exit fee, sometimes called a deeds release fee or mortgage discharge fee, when you close your account. This is typically between 50 and 300 pounds and is separate from any ERC.

When comparing deals, always calculate the total cost of switching, including all fees and charges, against the total savings the new deal will deliver. A mortgage broker can help you with this comparison and ensure you are looking at the full picture rather than just the headline interest rate.

Two-Year Fix vs Five-Year Fix: Which Should You Choose?

When remortgaging from one fixed rate to another, one of the biggest decisions you will face is how long to fix for. The most popular options in the UK are two-year and five-year fixed rates, though three-year, seven-year, and even ten-year fixes are also available.

Two-year fixed rates

Two-year fixes tend to offer lower interest rates than longer-term fixes. They give you flexibility because you are only tied in for a relatively short period, after which you can reassess and switch again if better deals have become available. However, the downside is that you will need to go through the remortgage process more frequently, incurring fees each time, and you are exposed to the risk of rates being higher when you come to remortgage again.

Five-year fixed rates

Five-year fixes offer longer-term security and peace of mind. You know exactly what your payments will be for a full five years, which is ideal if you value stability or are concerned about potential rate rises. The trade-off is that five-year fixes usually come with slightly higher interest rates than two-year deals and have higher early repayment charges if you need to exit early.

Factors to consider when choosing:

• Your plans for the property — If you might move within the next couple of years, a two-year fix gives you more flexibility. If you plan to stay put for the foreseeable future, a five-year fix could be the better choice. Many five-year fixes do come with portability options, allowing you to transfer the mortgage to a new property if you move.
• Interest rate outlook — If rates are expected to rise, locking in a five-year fix protects you for longer. If rates are expected to fall, a shorter fix lets you take advantage sooner.
• Total cost comparison — Compare the total cost of two consecutive two-year fixes against one five-year fix, factoring in arrangement fees, potential rate changes, and the time and effort of remortgaging twice.
• Your appetite for risk — If you prefer certainty and do not want to worry about what rates might do, a longer fix suits your temperament. If you are comfortable with some uncertainty and want the potential for a lower rate, a shorter fix could work.

There is no universally right answer, as it depends entirely on your personal circumstances, plans, and attitude to risk. A qualified mortgage adviser can model different scenarios for you and help you decide which option best fits your situation.

How the Remortgage Process Works Step by Step

Remortgaging from one fixed rate to another is a well-established process that thousands of UK homeowners complete every month. Here is what to expect at each stage:

Step 1: Review your current mortgage

Start by checking the details of your existing deal. Note when your fixed rate period ends, whether there are any early repayment charges, and what your current outstanding balance is. You can find this information on your latest mortgage statement or by logging into your lender's online portal.

Step 2: Check your property value and LTV

Get an estimate of your property's current value using online valuation tools or by checking recent sale prices of comparable properties in your area. Knowing your approximate LTV will help you understand which rate bands you are likely to qualify for.

Step 3: Research and compare deals

Look at the fixed rate deals available from different lenders. Compare not just the interest rate but also the arrangement fees, cashback offers, and any incentives such as free valuations or legal work. A whole-of-market mortgage broker can do this research for you and may have access to exclusive deals not available directly from lenders.

Step 4: Get a decision in principle

Once you have identified a suitable deal, apply for a decision in principle (DIP). This is a preliminary check by the lender to confirm they are likely to approve your application based on your income, outgoings, and credit history. A DIP is usually quick and involves a soft credit search that does not affect your credit score.

Step 5: Submit your full application

With a DIP in place, you can submit your full mortgage application along with the required documentation. This typically includes proof of identity, proof of income, bank statements, and details of your current mortgage.

Step 6: Valuation and underwriting

The new lender will arrange a valuation of your property and their underwriters will assess your application in detail. This stage usually takes one to three weeks.

Step 7: Mortgage offer

If everything is satisfactory, the lender will issue a formal mortgage offer. This document sets out all the terms of your new mortgage deal.

Step 8: Legal work and completion

A solicitor or conveyancer will handle the legal transfer from your old lender to the new one. Once all the paperwork is in order, completion takes place and your new mortgage begins. The whole process from application to completion typically takes four to eight weeks.

Throughout this process, staying organised and responding promptly to any requests for information will help ensure everything runs smoothly and your new deal starts on time.

Tips for Getting the Best Fixed Rate Remortgage Deal

Securing the most competitive fixed rate when remortgaging requires a combination of good preparation, smart timing, and knowing where to look. Here are some practical tips to help you get the best possible deal:

Improve your LTV position

Lenders offer their best rates to borrowers with lower LTV ratios. Even a small improvement can make a difference. LTV bands typically operate at 60%, 70%, 75%, 80%, 85%, and 90%. If you are close to a lower band, consider making an overpayment on your current mortgage to push your LTV below the threshold before you apply.

Review your credit report

Check your credit report with all three main UK credit reference agencies — Experian, Equifax, and TransUnion — well before you apply. Correct any errors, pay down outstanding debts where possible, and make sure you are registered on the electoral roll at your current address.

Use a whole-of-market broker

A good mortgage broker has access to deals from across the entire market, including some that are not available directly from lenders. They can compare hundreds of deals in minutes and advise on which one offers the best overall value for your specific circumstances. Many brokers offer their services at no cost to you, as they receive a commission from the lender.

Look beyond the headline rate

A low interest rate is important, but it is not the only thing that matters. Factor in arrangement fees, cashback offers, free valuations, and free legal work. A deal with a slightly higher rate but lower fees can sometimes work out cheaper overall. The true cost of a mortgage deal is best assessed by looking at the total amount payable over the full term of the fix.

Consider overpayment flexibility

Check whether the new deal allows overpayments without penalty. Most fixed rate mortgages permit overpayments of up to 10% of the outstanding balance each year. If you anticipate being able to make additional payments, this flexibility could save you a substantial amount in interest over the long term.

Do not forget about portability

If there is any chance you might move home during the fixed rate period, check whether the deal is portable. A portable mortgage can be transferred to a new property, which means you would not have to pay early repayment charges if you move. Most fixed rate deals do offer portability, but the terms can vary.

By taking the time to prepare and compare your options thoroughly, you give yourself the best chance of finding a fixed rate deal that saves you money and suits your needs perfectly.