In This Article
What are the benefits of fixing your mortgage?
The main benefit of fixing your mortgage is the certainty in mortgage payments.
A fixed rate mortgage means exactly that. During the fixed period, regardless of what happens to the Bank of England base rate or lender’s swap rates, your interest rate cannot move.
It will remain the same until the product expiry date, which may be in 2 years, 3 years, 5 years’ time or more.
Lenders all have various products allowing you to take fixed rates over a number of years.
They will not be suitable for everybody though. For example, if you were planning to sell the property in the near future, and there was a large penalty on the mortgage, you may lose money.
If interest rates were to drop, and you fixed at a higher rate, you may also lose out. Therefore, it is so important to take individual advice from a qualified person.
You should tell a mortgage advisor what your objectives are and your attitude to risk.
They would be able to look at the products available, explaining both the pros and cons, so you can make an informed decision once you have all of the information available to you that you need.
Make sure that your mortgage adviser is regulated by the Financial Conduct Authority, and able to offer a free consultation before any paid work is undertaken.
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What are the negatives of fixing your mortgage?
Like with anything, if there are positives, there are usually negatives too. Fixed rate mortgages are no different.
For instance, if you took a 5 year fixed mortgage at a rate of 5%, and 2 years later, competitor’s products were at 2%, this would mean that you are overpaying significantly.
Also, the majority of fixed rate products have an early repayment charge if you were to clear your mortgage early.
For example, some 5 year fixed products have an early repayment charge of 5% throughout the 5 year fixed period.
If your mortgage was £200,000, and you sold your property within this period, the early repayment charge would be £10,000.
This may mean that taking the fixed product was not the best idea.
This will, however, depend on what it has saved you during this time, whether you were willing to pay a premium to be certain of what your costs were so you could budget accordingly.
If you believe that interest rates are going to rise, there is a strong argument for a fixed product.
Also, if you just want to know from the outset what your monthly payments are, regardless of any changes in the economy, they can make sense.
The most important thing is to seek expert advice rather than come to a decision from a generic article, or similar.
A qualified mortgage adviser will be able to understand your situation and pick one of the many mortgage products available to suit your needs.
How long can I fix my mortgage for?
Lenders usually have a selection of products meaning that fixed rates are available for a wide selection of terms.
For instance, 2, 3, 5, 7 and 10 year fixed terms may be available when you go to take your mortgage.
Bear in mind, there are often penalties for coming out of the mortgage early so your fixed period should be taken alongside your personal objectives, for instance, when you plan to sell.
Talk with an experienced mortgage adviser about your goals and concerns so they can help you to choose a suitable mortgage product.
Are 10 year fixed mortgages a good idea?
10 year fixed mortgages can be a great solution for the right people, but they will not suit everybody.
10 years is a long time to bet against any significant changes happening in your lifetime.
With early redemption penalties on the majority of the products, it can be expensive to exit a mortgage early.
If within the 10-year fixed period, you needed to sell your property and were not able to port your mortgage for any reason (or did not plan to buy again), the early repayment charge could be significant.
Having said that, if you expected major changes within the 10 years fixed period, and were comfortable with the penalty, they make a lot of sense.
If interest rates were to drop, you would likely to be paying a premium for the product. If however they went up, you may be getting your mortgage at a discount.
It is impossible for anybody to really know what will happen with the economy, so taking a product that fits your attitude to risk aligned with your personal situation, is prudent.
With many products available, talk to an adviser that can point out the features and charges of the products and help you to make an informed decision.
Is it important to take mortgage advice when considering fixing my mortgage?
Taking advice from a qualified mortgage adviser is always important. Although fixing the rate on your mortgage works for most people, it will not be suitable for everybody.
Many of the products have penalties which you may not be prepared to pay if you believe you were going to redeem the mortgage soon.
You may also believe that rates are going to decline and therefore do not want to pay a premium for a fixed rate product if the rate seems high.
These are discussions that you should be having with an experienced mortgage adviser so they can make a recommendation for a product that they believe meets your needs.
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Fixed rate mortgages are the most popular mortgage product over trackers, discounted and standard variable rates products.
This is because many people want to know what they will be paying each month for a certain amount of time, regardless of what happens with interest rates elsewhere.
This can be very important when it comes to budgeting for your household expenditure.
Fixed rate mortgages are available across the lenders for many different time periods, from 2 to 10 or more years, depending on the lender.
The correct product for you will depend on your individual situation and your attitude to risk.
You should talk with a qualified mortgage adviser about your aspirations and concerns with regards to the mortgage market.
They will be able to help you find a product that suits your needs.
If you would like I NEED ADVICE to match you with a qualified and regulated mortgage adviser, who can offer you a free consultation, please complete the contact form.