Actual 2 year fixed term length shortened

K_S

Dermiemac said:

K_S said:

Dermiemac said:

Just want to flag/check if a 2 year fixed term (for example) can normally be cut short by a few months? Is this common knowledge?

I got an offer from HSBC via a broker in December 2019, and then completed on the house and drew down the mortgage at the end of March 2020. So I thought I was ok until then with regards payments and a new deal, but it turns out a "Fixed Rate Period" was specified in the offer, ending in December 2022, I am losing 4 months of payments at the lower rate of this current mortgage, essentially costing several hundred pounds, as I'm getting shifted to a new higher rate sooner than expected.

My broker says only Nationwide stick to their term from drawdown, is this standard practice?

@dermiemac Your broker is indeed correct. With most lenders, the product that you apply for has a fixed end date (which is rolled forward every few months) which will be approximately 2/3/5/7/10 years from then, give or take a few months. So depending on when you apply and complete, the actual length of the fixed period (from completion) can vary.

A minority of lenders (Nationwide being one example) give a true 24/36/60 months from completion. So if you complete on 15 Dec 2022 on a Nationwide 2 year fix, the fix will end on 31 Dec 2024.

Either way, the above will have been clearly laid out in the illustration/KFI/quote shared by the broker prior to getting your go ahead for a full application.

Thanks all. I think it's a bit ambiguous as there are 24 payments also clearly stated at the fixed rate in the mortgage illustration, along with the total number of payments. As per @adamL sometimes it can work in your favour, it hasn't this time for us!

I just hadn't seen this detail or it discussed anywhere online either when I was looking for for confirmation, so appreciate the feedback on here.

@dermiemac It's absolutely valid on your part to assume that an X year fix would be exactly (or very close to) X years long, that's a common misconception among my clients, especially FTBs. Besides mentioning it in the suitability letter to the client, I can't say that I always discuss it separately. Often I do stress the actual end date of the fix to my clients but it rarely ever causes the client to choose a different lender as most aren't really bothered enough with the exact length of the fix to override the 'best' rate.

In some scenarios it's very important to factor in the actual fix end date, for example new build offers. New build offers can often take 9-12 months from application to completion and in those cases if I'm retaining the original product, with some lenders you can end up starting with a 2 year fix and ending with an actual fixed period of just 14-15 months after completion. 

kingstreet

When recommending a product, our recommendation letter says for example "TSB fixed rate product at 3.94% for five years (until 30/11/2027)" so we always qualify the actual end-date; unless it has a fixed period then it would be "Precise Mortgages fixed rate at 2.99% for two years from completion."

This is issued within a few days of the application being submitted with a copy of the final illustration, which was accepted by the customer prior to submission.