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Should I Break My Mortgage Deal? | Rates Are Going Up? | Mortgage Advice

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Video Transcript

Today’s discussion focuses on rising interest rates and how they may affect fixed-term mortgages—especially if your current deal is due to end in the next 6–12 months.

Should you switch your mortgage deal now (and pay an early repayment charge), or wait in hopes that rates will fall?

Introduction

Hello and welcome back to our channel and podcast. My name is Gemma, and here at WIS, we talk about all things related to money, mortgages, and maintaining a positive money mindset. If that interests you, be sure to subscribe and give us a thumbs up—it really helps our channel grow and ensures you don’t miss future content.

In today’s episode of Let’s Talk Money and Mortgages, we’re joined again by FD. For those who don’t know, FD is a trained accountant and mortgage advisor with over 11 years of experience, and one of the founding directors here at WIS.

Should You Break Your Current Mortgage Deal?

Host: We’re getting lots of questions about rising interest rates. Many people on fixed-rate deals are wondering whether they should switch now before rates climb further. So, is it a good idea to break your existing mortgage and get a new deal?

Answer: The honest answer is—it depends. There’s no one-size-fits-all answer.

  • If you’re on a variable rate, and interest rates are rising, it might be a good idea to fix your rate.
  • However, future interest rates are unpredictable—they’re influenced by central banks and economic conditions.

If you’re unsure, it’s always best to speak with a mortgage advisor.

Fixed vs. Variable Rates

Variable Rates:

  • Often linked to central bank base rates.
  • Monthly payments can increase if rates rise.
  • Usually no early repayment charges (ERCs)—so more flexibility.

Fixed Rates:

  • Offer stability, but come with early repayment charges if you exit early.
  • Typical ERC structure:
    • Year 1: 5%
    • Year 2: 4%
    • Year 3: 3%
    • Year 4: 2%
    • Year 5: 1%
  • Some lenders charge a flat rate throughout the term.

When Might It Make Sense to Switch Early?

If you’re nearing the end of your fixed term (e.g., within the last year), it may be worth reviewing your options.

  • Some lenders offer mortgage deals that are valid for up to 6 months.
  • Locking in a deal early can protect you if rates rise.
  • If rates fall before completion, you may still be able to switch.

Key idea: You can adjust if rates go down—but you’re stuck if they go up.

How to Decide: Break or Stay?

This requires careful calculation. Consider:

  1. Early Repayment Charge (ERC)
    • Example: 1% of remaining balance = £1,000
  2. Potential Savings
    • Compare your current rate vs. expected future rate
  3. Additional Costs
    • Legal fees
    • Exit fees
    • Broker fees (if applicable)
  4. Time Horizon
    • How long you’ll stay in the new deal
  5. Future Rate Predictions
    • This is uncertain—essentially a “crystal ball” factor

Because of these variables, it’s best to consult an advisor before making a decision.

Are Variable Deals Ever a Good Idea?

In a rising interest rate environment, variable deals can be risky.

However, they may suit certain situations:

  • Short-term ownership (e.g., planning to move within a year)
  • Avoiding ERCs from fixed deals

For example: If you only need a mortgage for 1 year but the shortest fixed deal is 2 years, a tracker mortgage might be more flexible.

Should You Fix Your Rate Now?

For many people, fixing their rate may be a good option—but the real question is:

For how long?

Some borrowers are rushing into:

  • 5-year fixed deals
  • Even 10-year fixed deals

While rates may look attractive now, consider:

  • Will your circumstances change?
  • Are you planning to move?
  • Will your family situation evolve?
  • Could you need a larger property?

Long-term fixes come with penalties if you exit early, so they’re only suitable if your situation is stable and predictable.

Final Thoughts

There is no universal answer—it all depends on your personal circumstances.

Before making any decisions:

  • Review your current deal carefully
  • Calculate all costs involved
  • Seek professional advice

Reminder

Your home may be repossessed if you do not keep up repayments on your mortgage.

Thank you for joining us. We hope you found this helpful—see you next time!