The Loans Network

Fixed Rate Mortgages

The fixed rate mortgage provides guaranteed payments for a predetermined period. This means that the interest that you will be paying, therefore your monthly repayments, will remain at a set amount for the duration of the agreement. It is ideal for home buyers that want to know exactly how much their mortgage will cost, without it being affected by any possible fluctuations that The Bank of England choose to impose on the base interest rate. You are therefore protected against rising interest rates during the period you agree to, so you can set your budget with confidence.

When researching fixed rate mortgages, you should pay close attention to the interest rate that is being advertised. This will have an immense influence on how much the mortgage will cost, so be sure that you are looking at the standard interest rate and not a special introductory rate that will rise after a set period of time.

Deciding on the duration to fix the rate of your mortgage can be a difficult decision and, potentially, a costly one. You will need to base your decision on how you think the base rate will change in the future, and how much of a risk you are prepared to take. Our experts will be able to offer invaluable advice to help you weigh up your options and decide on a term that is best for your circumstances

The amount of time that the rate is fixed for is entirely up to you, if the base rate is low when you take out the mortgage then you may wish to fix the rate for a long time, or even for the entire life of the mortgage. But you must bear in mind that by fixing your rate you are taking a gamble on interest rates. If the base rate does fall you will be stuck with a higher rate to pay for the duration of the agreed period made between you and the lender. However, if the base rate were to rise then your monthly repayments will not be affected meaning that the cost of your mortgage will not incur any additional costs.

The majority of lenders offer fixed rate periods over six months up to twenty-five years. Research has shown that two to five years are the most popular due to cautious buyers being concerned about the fluctuating base rate. If you fix your rate for two years, and the interest rates rise past the level you chose, then it would have proven to have been a wise investment.

Look for a fixed rate mortgage that doesn’t penalise you for completing your repayment period early. This will allow you to switch to a different mortgage in the future should you find a better mortgage proposal without incurring any extra financial costs through redemption penalties.

Recently, in order to entice borrowers, lenders have provided special incentives on fixed rate mortgages. These have ranged from special interest rates for first time buyers to lower interest rates for those who intend on taking out a larger loan. Help with any legal and survey fees are also available for those who are unsure of their situation.

Fixed rates bring security and peace of mind, which some people find invaluable. When you are looking at a debt the size of a mortgage, knowing exactly how much will be going out of your bank account each month can be reassuring. Our experts recommend that if you look at a fixed rate mortgage as a type of insurance then its concept becomes quite clear. Everyone pays premiums to insure either their car or their property against fire and theft so that they aren’t left in a difficult position if it were to occur. So, paying a fixed rate on your mortgage ensures that you won’t be paying more money than necessary against the possibility of rising interest rates.