Fixed rate
With a fixed rate mortgage you know exactly how much your mortgage payments will be every month. Fixed mortgages are taken out for anything from 2 to 25 years. At the end of the fixed rate period, you revert to your lender’s standard variable rate (SVR) or can remortgage to another deal.
Because your mortgage payments are fixed, budgeting is much easier than if you are on a variable rate. There are no nasty surprises. Fixed mortgages are therefore ideal for first-time buyers and those on tight budgets.
Be careful of fixing your mortgage for too long as circumstances can easily change. Fixed rate mortgages come with early repayment charges (ERCs) so if you move within the fixed period you may have to pay a severe penalty of thousands of pounds for doing so. Don’t fix for longer than you are absolutely sure about.
Those on fixed mortgages don’t benefit from falls in base rate either because their monthly payments are guaranteed. So in a falling interest rate environment, you may end up paying more if you opt for a fixed rate.
- You know exactly how much your mortgage is each month to help with budgeting.
- You are protected from increases in base rate.
- A choice of fixed-rate periods are available – from two to 25 years.
- You don’t see any reduction in your mortgage payments if base rate falls.
- You are tied into the mortgage for potentially an extremely long period of time and may have to pay a penalty to switch to another deal.
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