Fixed Rate Mortgages
Fixed rate mortgages are one of the most popular mortgages available, mainly due to the reduced risk element. Fixed rate mortgages work by fixing the interest rate for a set period of time, eliminating the risk of nasty repayment surprises and making it alot easier to manage your finances. The fixed monthly repayments make them ideal first time buyer mortgages providing the peace of mind and stability first time buyers require.
About Fixed Rate Mortgages
Fixed rate mortgages are commonly offered over 2 to 5 years however shorter and longer terms are available, some lenders may even offer upto 25 years with a fixed rate. When the fixed rate period expires most lenders will revert to their standard variable rate (SVR), which will usually track ~2% above the base rate, it's at this point that most borrowers will look to get a remortgage quote. This means shorter term deals are more popular with savy borrowers looking to move to the best deal at the earliest oppotunity. Of course this type of mortgage is not without risk, but the risk is limited, it is entirly possible that you may find yourself paying over the odds if the base rate drops but if the base rate becomes volitile and increases your repayments will remain the same. There are some factors to consider though.
Choosing The Right Length Of Fixed Rate Mortgage
The length of the fixed rate is all down to personal preference but sometimes swayed by the ecomonic climate, for example if you anticipate The Bank Of England base rate increasing, a longer fixed rate deal may see you better off in years to come. That said, most borrowers opt for shorter term fixed rate deals in an attempt to reduce the risk of paying over the odds and allow them to reassess the market sooner rather than later, however this approach can prove expensive, if the base rate has increased when you come to remortgage you will struggle to find a better interest rate and have to pay remortgaging fees.
What To Look Out For
The fixed rate mortgage market is very competitive forcing lenders to offer some very attractive fixed rates, however it's common practise for lenders to protect thier investment by including high early settlement charges. These charges or penalties are design to tie you into the mortgage for at least the term of the fixed rate in order to reduce the risk to the lender. Whilst lenders arrangement fees tend to be reasonable, their booking fees can be hefty so be sure to consider this when comparing mortgages.