A fixed rate mortgage is common and is a way to fix the interest rate on your payments. The interest rate is fixed for a certain length of time i.e. 2% interest for 5 years.
A fixed term mortgage will not cover the overall mortgage term. So, you may have a 25 year mortgage with an interest rate of 2% for the first 5 years.
How long your fixed rate lasts depends on your circumstances and your lender. You could have a fixed rate from between one year and ten years. However, the longer the term the higher your rate will likely be.
What happens when that fixed rate term ends?
When your fixed rate term comes to an end, you’ll be placed on your lenders Standard Variable Rate (SVR) unless you decide to remortgage. Like other variable rates it means that the interest rate you’ll pay will change depending on what the Bank of England Base Rate is, and what your lender chooses to do.
Fixed rate mortgages come with advantages:
- Knowing exactly how much you’ll be paying each month
- They offer stability
- You’re not affected by changes in the Bank of England’s base rate
However, likewise they come with disadvantages when compared with a variable rate mortgage such as a tracker:
- If interest rates fall you could end up paying more
- Steep early repayment charges
- If you’re planning to move within a few years you may not want to tie yourself into a long-term deal T
There is no one best fixed rate mortgage deal, what’s right for you won’t be right for someone else. The best deal with therefore depend on your individual circumstances.
Get in touch and we’d be happy to put you in contact with a suitable specialist who can walk you through your options.