Fixed Rate Mortgages – Need To Know Now

This is about expiring fixed rates and it matters.

The most common period for any fixed rate borrowing (especially commercial mortgages) is five years. The bit that always catches our clients is just how short a period of time five years is, it goes quickly, really quickly. 

Historically, base rates of interest have been low, very low. That has meant many borrowers have been relaxed about fixed rates expiring and happy to review matters later in the day.

The times though, quote Bob Dylan, they are a chang’in. 

The chances are if you have a five year fixed rate buy to let or commercial mortgage due to expire anytime in the next 12-18 months, I would look at it now rather than wait.

There are two good reasons for doing this.

One, whilst fixed rates and base rates don’t follow each other, it is fair to assume that the cost of borrowing for the lender will increase and that cost be reflected in the fixed rates on offer.

The second reason is that it takes time to remortgage and we are seeing that time stretch out as solicitors are busy and valuers a little nervous about the property market and economic outlook.

I have always said the best time to borrow is when you don’t need to, it still applies.

Why You Act Early

If you leave it until your fixed rate is about to expire your options will be more limited. Most lenders will advise you of the upcoming end of your fixed rate around six months before. I think you should be looking at your fixed rate much earlier.

Let’s Give An Example…

Let me give you an example. In the last year of your fixed rate there may be no early repayment penalty, or there may be a 1% penalty to repay early. Either way the cost to break your current fixed rate is not punitive. If you can get a fixed rate 0.5% cheaper by doing that now you recover the cost in two years and benefit for the rest of the fixed rate term. Make sense?

There is sense in doing things early.

Fixed rate buy to let and fixed rate commercial mortgages. Act early, give yourself more options, control your costs and be a little smug for doing it right.

Any questions then give me a bell on 01293 541333.

Dave Farmer