What is a fixed rate mortgage?
A fixed rate mortgage is a type of mortgage whereby the interest rate that you pay is fixed over a set term. For example the interest rate could be fixed for 2, 3, 5 or even 10 years.
After the fixed rate term is over the mortgage then reverts to your lenders standard variable rate (SVR) mortgage that tracks the Bank of England base rate (BOE). Standard variable rate mortgages can go up or down in cost with changes in the BOE base rate fluctuations.
Why do people choose fixed rate mortgages?
Fixed rate mortgages provide a period of certainty and peace of mind for the borrower that the cost of the mortgage will not rise or fall for the fixed rate period they have chosen.
This allows families to budget for their home expenses and costs knowing that the cost of their mortgage isn’t going to change within the fixed period.
Some people choose a fixed rate deal to “lock in” a fixed interest rate for a period of time if they feel that the interest rates are going to rise in the near future. This then provides potentially a cost saving and knowing that they will not be susceptible to future rate rises.
What are the disadvantages of a fixed rate mortgage?
Variable Rate Mortgages
In the event that interest rates where to fall within this period you would not benefit as you will be stuck with a fixed rate. There is also likely to be higher set up charges and higher early redemption charges if you were try and pull out of your mortgage before the end of the fixed term.
Fixed rate deals
Fixed rate deals are available on a whole range of mortgages, from fixed rate buy to let mortgages, interest only mortgages and capital repayment mortgages. Every UK mortgage lender provides a range of fixed rate mortgage products to choose from.
How can I get more advice?
If you are unsure what is the best type of mortgage for you then speak to one of our mortgage experts here on the website. They will be able to explain all the options that are open to you and will help to answer any questions or concerns you may have. Our mortgage comparison tools find and display all the fixed rate deals from the whole UK market place.
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