In a bit of a fix

Our lawyer Fiona McNulty looks at the penalties that may apply when ending a fixed-rate mortgage early
Mortgage swap cartoon
© Malcolm Willett (www.willett-ink.co.uk)
Question: There have been redundancies in my company and I think I may lose my job soon, so I am looking for savings.

I have a fixed-rate mortgage and, therefore, am not benefiting from the really low bank rate at the moment. Is there any point in me trying to get out of the fixed rate so I can change my mortgage to a tracker or something? That way I could save money just in case I am made redundant.

Answer: Contact your lender and explain the situation about your employment and your concerns. If you end a fixed-rate mortgage early, a fee, known as an early redemption penalty, is likely to apply.

This may be a substantial sum and you must consider carefully whether the savings you will make by changing your mortgage will be worthwhile after you have paid off the penalty.

If you have a particularly cheap fixed-rate mortgage, even if your fixed period has expired, you may still have to pay a redemption fee. A tracker mortgage will allow you to take advantage of the current cheap Bank of England base rate but do remember that a tracker mortgage moves with that base rate and so, though the base rate is very low now, your interest rate will increase if the base rate goes back up.

In addition, to obtain a new mortgage, even if you remain with the same lender, your property will have to be valued and, if the value has decreased, you may be unable to get a mortgage for an amount equivalent to your current mortgage.

What's your problem?


If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

Fiona is a partner in the property team at Thring Townsend Lee & Pembertons Solicitors www.ttuk.com.

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