Should I Remortgage Before My Fixed Ends? Our 2026 Framework

How Early Repayment Charges Work

An early repayment charge (ERC) is a fee charged by your lender if you pay off your mortgage before the end of your fixed period. It compensates the lender for the interest they expected to earn over the full fixed term.

ERCs are almost always calculated as a percentage of the outstanding balance, and they typically step down over the fixed term. A common structure on a 5-year fix is: 5% in year 1, 4% in year 2, 3% in year 3, 2% in year 4, 1% in year 5. On a 2-year fix it is often 2% in year 1, 1% in year 2.

For example, with £220,000 outstanding and a 3% ERC, breaking costs £6,600. To justify that, you need the new deal to save you more than £6,600 over the period remaining on your current fix. On a 0.5% rate saving, that is roughly 5 years of savings, which is usually more than the remaining term.

Some lenders additionally charge an admin fee of £50 to £300 on redemption. Add legal and valuation fees for the new mortgage (£300 to £1,500 depending on whether free legals are offered). The total cost of breaking can easily exceed the headline ERC.

You also lose the remaining months of your current rate. If your current rate is lower than the new rate, you lose savings as well as paying the ERC. This only makes sense if the new deal is materially cheaper than your existing one, which is rare mid-term.

The Break-Even Framework

The decision reduces to a single calculation: how long will it take for the monthly savings from the new deal to recover the ERC and associated costs?

Step 1: Calculate the ERC. Multiply your outstanding balance by the current ERC percentage. Check the ESIS from your original mortgage offer for the exact schedule.

Step 2: Calculate the monthly saving. Compare your current monthly payment with what it would be on the best new deal you can get. This is your pure rate saving.

Step 3: Calculate break-even months. ERC divided by monthly saving. Add administrative costs (legal, valuation, admin fee) to the ERC in the numerator.

Step 4: Compare with time remaining. If the break-even period is shorter than the time left on your fix by 6+ months, breaking usually wins. If it is longer than the remaining fix, breaking loses.

Example: £250,000 balance, current rate 5.49%, new rate 4.19%. Monthly saving £182. ERC at year 2 of 5-year fix: 4% of £250,000 = £10,000. Plus £1,000 of legal and admin costs. Break-even = £11,000 / £182 = 60 months. With 3 years (36 months) left on the fix, breaking loses by 24 months.

The same calculation with a 2% ERC (£5,000 + £1,000 = £6,000) and the same monthly saving breaks even in 33 months, so you need 3+ years of fix remaining to recover. On 36 months remaining, breaking wins by 3 months. Still marginal.

Decision Matrix for Breaking Early

Use this matrix to cross-reference your situation against the recommendation.

Years left on fix	Current rate vs new rate	ERC %	Recommendation
Under 6 months	Any	Any	Wait; most lenders allow a new deal in the final 6 months anyway
6 to 12 months	Current 1%+ higher than new	1% or less	Break; saving usually recovers the ERC
6 to 12 months	Current similar to new	Any	Wait
12 to 24 months	Current 1.5%+ higher than new	2% or less	Run the numbers; marginal
12 to 24 months	Current lower than new	Any	Wait; you are already in a good deal
24 months+	Current 2%+ higher than new	3% or less	Possible; needs careful modelling
24 months+	Current 1% lower than new	Any	Wait; breaking accelerates cost
Any	Selling or moving imminently	Any	Consider porting instead of breaking

The matrix captures the general shape. Always model your specific numbers; edge cases can flip the recommendation.

Worked Example: When Breaking Early Wins

Consider Michael, who fixed at 5.79% in late 2023 on a £190,000 balance. He is now 15 months into a 2-year fix, with 9 months remaining and an ERC of 1% (£1,900). The market-leading 5-year fix with Halifax is 4.29%, with £999 fee.

His current monthly payment at 5.79% is £1,177. On a new 4.29% 5-year fix it would be £1,035, a saving of £142 per month.

Cost of breaking: £1,900 ERC + £999 fee + £300 legal/admin = £3,199.

Break-even months: £3,199 / £142 = 23 months.

Michael has 9 months remaining on his current fix. If he waits those 9 months, he loses 9 months of saving (9 x £142 = £1,278). Then he gets the same new deal at the same rate (assuming rates are stable).

If he breaks now: he spends £3,199 and gets 9 extra months of saving (£1,278). Net cost of breaking versus waiting: £3,199 - £1,278 = £1,921. That is the cost of the ERC itself, essentially.

Unless he expects rates to rise significantly over those 9 months, waiting is slightly cheaper. He should book the new deal with Halifax today for completion at his fix expiry, and lock in the rate for that date.

The rule: breaking wins over waiting only if you expect rates to rise during the remaining period, or if the new deal is materially cheaper and you have lots of remaining time (2+ years) for the saving to compound.

When Breaking Early Is a Clear Win

A small number of situations make breaking early unambiguously the right move.

Scenario A: You fixed at the peak in 2023 and are still inside the term. Some borrowers fixed at 6% to 6.5% in late 2023. With new deals at 4.19% to 4.39%, the rate gap is 2% or more. On a £250,000 balance that is £417 monthly saving. Even a 3% ERC (£7,500) pays back in 18 months.

Scenario B: You have a rare 10-year fix that is now uncompetitive. Ten-year fixes from 2020 to 2021 priced below 2% are now below market; those fixed higher in 2022 to 2023 may be well above market. For the latter, 6+ years of remaining term can justify a 4% to 6% ERC.

Scenario C: Selling or moving and your lender does not port well. If you are moving, porting is usually free. But some lenders port poorly, forcing you to complete a new application anyway. If porting fails, breaking early is unavoidable and the ERC is effectively a cost of moving.

Scenario D: You need additional borrowing and your current lender will not do a further advance. If your lender refuses a further advance at an acceptable rate, you must remortgage to a new lender with the extra borrowing. Breaking may be unavoidable.

Scenario E: You have windfall funds to pay off the mortgage entirely. If you have received a large inheritance or bonus and can clear the mortgage, the ERC is the final cost. Compare it to the remaining interest cost of the mortgage; usually the ERC is materially cheaper, so paying it off in full wins.

When Breaking Early Is a Mistake

More commonly, breaking early costs more than it saves.

Scenario F: Early in a 5-year fix at a good rate. Sarah fixed in early 2024 at 4.49% for 5 years. Rates are now 4.19%, saving her 0.3%. Her ERC is 4% of a £180,000 balance (£7,200). Break-even on a £45 monthly saving is 160 months, or over 13 years. Wait.

Scenario G: Chasing rate forecasts. Some borrowers break fixes early to try to time the market. Unless the gap between current and new rate is 1.5%+ and the remaining fix is under 12 months, this almost never pays off. Rate forecasts are notoriously unreliable.

Scenario H: To switch lenders for service reasons. Poor customer service is frustrating but rarely justifies a 2% to 5% ERC. Wait until the fix ends and then switch lender at no penalty.

Scenario I: Because someone else is getting a better deal. Your neighbour is on 3.49%, you are on 5.49%, but they fixed in 2020 and you fixed in 2023. The fix rate in 2023 was what it was, and breaking now does not recover that historical gap. Focus on your own break-even calculation, not others' rates.

Scenario J: Panic about future rate rises. Breaking to "lock in" today is only worthwhile if you genuinely cannot tolerate your current rate and have strong evidence new rates will rise sharply. If your current rate is already close to prime, stay put.

Alternatives to Breaking Early

Before committing to break early, consider these alternatives.

Product transfer at the end of the fix. Most lenders allow you to lock a new retention product up to 6 months before your fix ends. You get the new rate when the old one expires, no ERC. This is the default option for most borrowers.

Overpay within the 10% allowance. If you have surplus cash, overpay up to 10% of the balance annually with no ERC. This reduces your balance, potentially drops your LTV into a better band for your eventual remortgage, and saves interest at your current rate.

Further advance from your existing lender. If you need additional borrowing, a further advance sits on top of your main mortgage at a separate rate. You keep your current low fix intact and add new borrowing at today's rate. Cheaper than breaking in most cases.

Second-charge loan. If you need funds and a further advance is refused, a second-charge secured loan sits behind your first mortgage. Rates are higher (5% to 12%) but you avoid the ERC on your first mortgage.

Port the mortgage. If moving, port your existing deal to the new property. You keep your current rate and avoid the ERC. Porting is not automatic; you need the new property to meet the lender's criteria.

Pay the ERC only on the portion you redeem. Some lenders allow partial redemption at lower cost. If you need to release £30k, paying the ERC on £30k rather than the full balance may be an option. Check your lender's specific rules.

Only commit to breaking the fix if none of these alternatives meet your need. In most cases one of them does.