UK interest rates are currently at an all-time low. This inevitably means that some customers on fixed-rate mortgages taken out a while ago are on rates that look comparatively high. Here are some of the questions customers with C&G fixed-rate mortgages have been asking us, and our reply.
Why can’t I switch out of my fixed rate?
You can, but there’s an early repayment charge for coming off the deal early. If you'd like to find out more, learn about the early repayment charge or call us on 0845 603 1637.
I’m on a fixed rate - am I at a disadvantage compared with a variable rate currently?
Until quite recently, fixed-rate mortgages generally had lower rates than variable rate mortgages, and many people took advantage of this. But the real benefit of a fixed rate is to remove the impact of rates going up and down. And, even though variable rates are lower than fixed rates currently, it's important to consider the position over the whole fixed-rate period.
Why is there a charge? Would you consider waiving charges?
The reason the charge is there is because the mortgage lender itself (Lloyds TSB in the case of C&G mortgages) has to buy the money at a fixed rate and for a fixed period, and can’t walk away from it either. The charge reflects the cost to them if they do, and we cannot waive it. The amount of any early repayment charges would have been detailed in your Key Facts Illustration and your mortgage offer.
Why can't I just switch onto the Standard Variable Mortgage Rate?
The Standard Variable Mortgage Rate (SVMR) is the default rate that applies at the natural end of your fixed-rate period, unless you choose to move onto a new deal. Its not available at any other time, including as a rate for new customers to take out when they first come to us. This is common across the mortgage market. Also, the SVMR only applies as the reversionary rate for mortgages that were applied for before 1 June 2010. For mortgages that were applied for after 1 June 2010, the reversionary rate is the Homeowner Variable Rate (or Buy-to-Let Variable Rate).
Learn more about the Standard Variable Mortgage Rate
Is there any flexibility for customers who are tied in for a long period of time?
It’s important to keep in mind why people sign up to fixed rates. It’s so they know where they stand, because no-one knows what’s going to happen to interest rates over time. So the real benefit of a fixed rate is to remove the impact of rates going up and down. And the longer period a rate is fixed for, the more chance that rates will move either side of the fixed rate.
If they go higher for a period, the fixed rate gives the customer an advantage, which can be significant if the mortgage could become unaffordable at a higher rate.
But rates can also go lower than the fixed rate over time, which is what’s happening now. However, at least the position of a customer on a fixed rate is no worse in that they are still paying the same amount as they were previously.
Whatever the period of a fixed rate, the mortgage lender itself (Lloyds TSB in the case of C&G mortgages) has to buy the fixed-rate money it lends at a fixed rate and for the relevant fixed period itself, and can’t walk away from it either. Everyone involved signs up to the deal - so, no, it’s not something that can be changed.
