How to get a better mortgage rate when your deal ends

If your fixed rate is ending in the next six months, the next few weeks matter more than most people realise. Do nothing, and your lender will usually move you onto a rate that costs a lot more. Plan it, and you can often lock in a better deal before the old one runs out.

Here is what decides the rate you are offered, and what you can do about each part of it.

What happens if you do nothing

When a fixed or tracker deal ends, most lenders move you onto their standard variable rate (SVR). It is the lender's default rate, and it is usually much higher than the deals they offer to new and switching customers. It can also go up at any time.

It is the most common way people end up overpaying on a mortgage, and it is also the easiest to avoid.

Start early

Most lenders let you lock in a new deal a few months before your current one ends, and many allow up to six months. The new rate then starts when the old one finishes, so you avoid the SVR and don't pay an early repayment charge for leaving your current deal early.

If rates move before your deal ends, you can usually still switch to a better one if it appears. Starting early costs you nothing and gives you options.

Stay with your lender, or move?

You have two routes:

• A product transfer. You stay with your current lender and pick one of their new deals. It is usually quicker, often with no new credit check or valuation.
• A remortgage. You move to a different lender. It takes a little longer, but you get the whole market to choose from, which can mean a lower rate.

Neither is always better. Compare your lender's offer with the rest of the market before you decide.

The things that decide your rate

How much you owe against your home's value

This is the loan to value (LTV). The less you owe as a share of the property's value, the lower the rates you can get. Rates tend to drop at set points, commonly 90%, 80%, 75% and 60%. If you're just above one of those points, paying down a small amount or an updated valuation could move you into a cheaper band.

Your credit file

Lenders check it when you remortgage. Check yours with all three credit reference agencies before you apply, correct any mistakes, and avoid new credit applications in the run-up. If you've had problems in the past, there are lenders who will still look at your application. It helps to know which ones before you apply.

Fees as well as the rate

The lowest rate isn't always the cheapest deal. A low rate with a large arrangement fee can cost more overall than a slightly higher rate with no fee, especially on a smaller mortgage. Compare the total cost over the length of the deal.

Should you shorten your term?

When you switch deals, you can also change how long is left on your mortgage.

• A shorter term means higher monthly payments, but you pay less interest in total and are mortgage-free sooner.
• A longer term means lower monthly payments, but you pay more interest overall.

If your income has gone up since you last fixed, shortening the term can save a large amount of interest. If you'd like to keep flexibility, many lenders let you overpay a set amount each year without a charge. Check the terms of any deal before you rely on that.

A simple checklist

1. Find out the date your current deal ends and what your lender's SVR is.
2. Around six months before that date, start looking.
3. Check your credit file with all three agencies.
4. Get an up-to-date idea of your home's value and how much you owe.
5. Compare your lender's offer with the whole market, including fees.
6. Decide whether to keep, shorten or lengthen your term.