The wisdom of going for a fixed rate mortgage

More information about Fixed Rate Mortgage deals

06:40 10 February 2014

As the term implies, a fixed rate mortgage sets the monthly mortgage amortizations to a constant amount for the entire length of the plan.  A variable rate mortgage on the other hand may fluctuate depending on the prevailing economic conditions, thus affecting the computation of monthly payments.  Being on a fixed rate, you can readily determine the amount you have to set aside for mortgage payment and set up a more effective budget.  One thing that could go against the fixed rate mortgage is that if the rate plunges down to an all time low, you will not be able to cash in on it as you are tied to the contracted fixed rate mortgage for the duration of the plan.

 

How Long Do Fixed Rate Mortgages Last For?

Fixed interest rates can last for up to ten years, although most plans last for two, three or five years. The most popular deals around today are for two years, allowing those in the property market to protect themselves from increases in interest rates for two years.

 

Application Fees

The best fixed rate plan generally comes with an application fee which may be from £500 to £2000.  Another fee you will have to contend with is the early repayment fee.  Paying this fee will enable you to settle your mortgage prior to the end of the fixed mortgage rate plan.  For standard length fixed rate mortgages, the standard fee is usually three percent.  However, if you want to cancel a longer term fixed rate mortgage, the fee can come up to as much as six percent.  In the end, you will have to look more closely if doing this will save you money after all the fees.  Having said this, one definite advantage of settling your mortgage early if not for the savings is having one less outgoing bill to worry about.  As nobody can accurately predict the future, in the event that your financial situation takes a turn for the worse, then at least your mortgage has been cleared.