FIXED RATE MORTGAGES

Fixed rate mortgages account for seven out of ten new mortgages taken out in Britain.

The actual fixed interest rate and the period over which it will apply depends on the terms of the deal you have chosen. With this type of mortgage, you can avoid the uncertainty of possible changes to your monthly payment by fixing the interest rate for a set period of time. This will be agreed at the start of the mortgage.The most popular, and sometimes the best value for money, deals offered by lenders are those that offer an initial special rate. This can either be a fixed or variable rate, set for a period, normally between two and five years. Fixed mortgages are a great way to make sure that you know exactly what your mortgage payments will be for a set period of time, no matter what the Bank of England does to the base interest rate. This can help you budget effectively in the short term.Fixed rate mortgages are changing fast and in most cases, for the better. Today you have more choice of rate, term and lender than before. Experts say you are also less likely to be trapped in a deal that is inflexible and with no way to reduce your payments if interest rates go against you. It’s good news for anyone struggling to borrow a large amount of money in what looks like an increasingly uncertain economic climate. But there are some down sides, in the form of ever higher application fees.Fixed rate mortgages can be beneficial for first time buyers and those on a budget who need the stability of a set monthly repayment. With a variable rate mortgage your payments may go up and down according to the Bank of England Base Rate. However with a fixed rate mortgage you have the security of knowing the exact amount you will need to repay each month, irrespective of any changes in interest rates. In general, fixed rate mortgages are seen to be a safer alternative to a variable rate. While its fact that you could ultimately end up paying more than you should have, the opposite applies and you could also end up paying less. The key point of a fixed rate mortgage has always been payment security. You know that the rate you will pay for your mortgage will stay the same for the pre-agreed term. This is normally two, five or ten years.