An article by The Guardian could make for uncomfortable reading for hundreds of thousands of homeowners across the UK. It reveals that 350,000 households could see a significant hike in their monthly repayments as their low interest fixed rate deals, which were taken out five years ago, come to an end.
The article points to research suggesting that half of mortgages taken out between October 2020 and February 2023 were on a five-year fixed rate, which averaged 1.88%. As the deals come to an end however, homeowners could see their interest rate increase substantially, resulting in their monthly repayments skyrocketing.
If you have a fixed rate that’s coming to an end you might be shopping around to find a deal that’s more competitive. If you are, you may need to take care as you could fall foul of your existing lender’s exit fees, which might be expensive.
These fees are not only charged when you transfer to a different lender though, and you may become liable to them if you decide to make an overpayment on your mortgage. Read on to discover more about mortgage lenders’ charges and when they typically apply.
Early exit charges can be substantial
Otherwise known as Early Repayment Charges (ERC), exit fees are usually applied to deals that mortgage lenders offer. This could include fixed-rate or tracker mortgages.
The fees are often charged if you settle your mortgage early or switch to another provider before your deal ends.
ERCs are usually a percentage of your outstanding mortgage balance and typically range from 1% to 5%, meaning the amount payable can be substantial. For example, if you are looking to switch a £250,000 mortgage with a 3% ERC, it will cost you £7,500.
For this reason, it’s important to consider your exit charge carefully before deciding whether to transfer to a new lender or pay off your outstanding mortgage. It’s worth remembering that in some cases the ERC reduces over time, which means you could pay less if you decide to switch your mortgage or pay it off later.
If you’re thinking about reducing your outstanding mortgage by overpaying the monthly repayments, it’s important to remember that some lenders limit the excess you can pay without incurring a penalty. If you exceed this limit, which is normally 10%, your lender is likely to impose an exit charge.
A mortgage broker could help you understand your exit charge
Whether you’re thinking about switching, overpaying or settling your mortgage, speaking to a professional who understand how ERCs work could be a very savvy move. This is why working with a mortgage broker can be a good idea, as they can explain the exit charges that your mortgage might have and how much it could cost you.
As a result, you may be able to avoid a costly charge that may significantly reduce the financial benefits of switching, overpaying or settling your mortgage. More than this, a broker can also explain any ERC that may be attached to the mortgage deal you’re considering, and whether there’s another option you could consider.
This in turn could help you to avoid becoming a ‘mortgage prisoner’. This is where the exit charges are so high that it’s not financially viable to switch providers, overpay or settle the outstanding amount, locking you into an uncompetitive deal that you’re unable to escape.
A broker could also secure a better mortgage rate
Broadly speaking, mortgage brokers have the ability to pass a lot of business to lenders. Consequently, lenders are keen to attract their business, which means they often offer deals to brokers that aren’t widely available to the public.
Because of this, a broker may be able to access deals with more attractive interest rates than you’d be able to find by yourself, which could reduce your monthly repayments. Alternatively, they may be able to offer you a fixed-rate product with a longer term that allows you to budget for further into the future.
It’s important to remember that mortgage lenders and comparison websites won’t tell you that mortgage brokers may have access to deals that are not widely available.
Get in touch
If you’re looking to switch your mortgage or pay your existing one off, we can help you understand your options and which might be best for you. Please call us on 0333 010 0008. We would be happy to arrange a no obligation initial meeting with one of AFH’s independent mortgage brokers.
14 October 2025