This type of mortgage means that your monthly payments are fixed for a predetermined time. If you fixed your Mortgage for 3 Years your monthly payment would not change over that period of time like wise if you have selected a 5-year fixed rate your monthly payment would stay the same for the next 5 years.
This type of mortgage is very popular in the UK the vast majority of people with mortgage are on fixed rate mortgages, the main reason behind this it enables monthly budgeting. Consumers can also compare the rate as they are all fixed and easy to understand. When the Base Rate decreases the consumer on a fixed rate mortgage will stay the same.
If the base rates start to decrease you will not get the benefit of these reductions however in the UK the base rates are on the increase (this page was written on the 29/04/2018) so now is the time to think about fixing your mortgage costs. Fixed rate mortgage tend to have a fee attached to them, the good news is brokers from 24-7 Mortgages have lots of lenders that do not charge a fee to fix your mortgage costs.
Final point on this all fixed rate mortgage carry an early repayment charge which means that if you were to leave the introductory before the fixed term expired there would be early repayment charges to be paid. These charges could be as much as 2-3% of the balance of your mortgage.
- You’re protected in the event interest rates rise
- Stable rates and payments make it easier to compare loan options from different lenders
- Help with Budgeting
- You can’t take advantage of falling interest rates
- Unlike an SVR mortgage, there is no lower introductory rate, unless you opted for a discounted rate mortgage
- Longer you fix the term for the higher the interest rate you will be charged
- If you leave early you will have an early repayment charge