The increase in the Bank of England’s base rate may be making you think about your current interest rate on your mortgage.
Maybe you’d like to fix your rate at its current level, so that you avoid any further interest rate hikes. Or, you might be unsure about whether that’s the right thing to do at the present moment. If so, this blog is for you.
Throughout this blog, we’ll be giving you some useful information on fixed rate mortgages, helping you to decide whether to do this.
What is a fixed rate mortgage?
With fixed rate mortgages, your interest rate will stay at the same level for an agreed time frame. This means that your interest rate will not fluctuate based on changes the Bank of England makes to the base rate. In other words, the rate is static.
Getting a fixed rate means that the amount you have to pay back each month won’t change, so it can help you with budgeting and may make managing your finances easier.
However, it does mean that you’re locked in for a set period of time. Therefore, if a better deal arises you won’t be able to switch until your term has finished.
What terms might be available?
There are a variety of different deals available ranging from 2 years to 10 years, so there is flexibility in the term you can get.
It largely depends on your own requirements and how long you would like to be locked in for. If you think you will want to switch to a different product sometime soon, it may be worth looking for a 2 year or 5 year fixed mortgage rate.
However, if you have no plans to change anytime soon, you may consider locking in for a longer period of time.
What are the benefits of fixed rate mortgages?
These solutions can be beneficial for a number of reasons. This includes:
- You'll know your repayments: Locking in for a set period of time means that you’ll always know how much you need to pay back each month. It won’t go up or down, so you’ll be able to budget more effectively.
- No changes throughout the term: If the Bank of England’s base rate goes up, it won’t affect you. This means that you could end up paying back less interest overall, compared to if you were on a variable rate mortgage.
- Flexible terms: There is a lot of flexibility over terms, so you can find a solution that fits with your plans.
- Competitive deals: Lenders are often quite competitive on these types of deals, which means you can often find a good offer.
What are the disadvantages of fixed rate mortgages?
Although there are benefits to this option, there are also some disadvantages that are worth considering. These are:
- No benefit from base rate decreases: If the Bank of England’s base rate decreases, you won’t benefit from it. Your interest rate will remain at the same level, whilst other people may enjoy a lower rate.
- Reduced flexibility: With these solutions, you may lose some flexibility, as you will often face early repayment charges if you want to make adjustments to your deal. It’s therefore important that you’re certain this is the right choice for you.
- Possibly higher interest payments: There is the chance that you could end up paying back more interest overall if rates do not rise.
Should I get a fixed rate mortgage?
Ultimately, it’s up to you to decide whether getting a fixed rate mortgage is the right option for you. However, it may be more appropriate if you would value having the same repayments each month.
Additionally, it could be a suitable option if interest rates are rising and you want to lock in to your current rate for a set period of time.
Getting advice from an experienced mortgage advisor could help you understand the different solutions available and which one may be the most suitable option for your plans.
Conclusion
In summary, it’s up to you to decide if it’s the right option. It’s important that you think carefully about the solutions available to you and weigh up the benefits and disadvantages before you settle on a decision. If you’re unsure about what the best option for you is, it’s important that you speak with a mortgage professional and get some advice.
Loans are secured against property - Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
