Mortgages
Fixed Rate Mortgage
Fixed rate mortgages are a popular alternative to standard variable rates.
The lender fixes the rate of the mortgage for a set period of time exactly as the name suggests.
The majority of UK mortgage lenders offer a range of fixed rate mortgages however the most popular ones are for 2 years, 3 years and 5 years.
It is possible, however to get a fixed rate mortgage for anything up to 25 years. In general the longer you fix your mortgage for the higher the interest rate charged.
Sometimes, due to the competitive nature of this sector of the mortgage business, the 2,3 and 5 year deals can have very similar rates.
Pros and Cons
Benefits:
The interest rate is fixed and so, should rates rise, you would be protected against these rises. The monthly mortgage amount that you pay would remain the same regardless of the movements within the British economy.
This gives peace of mind and makes controlling and budgeting your finances straightforward.
Disadvantages:
The major disadvantage is the exact opposite of the major advantage. Should interest rates drop below your fixed rate you would be paying more for your mortgage.
Most lenders require a minimum time for you to hold the fixed rate mortgage before you can switch to another mortgage. This is known as the tie-in period.
Usually this is for the length of the fixed rate however some lenders require you to remain with them for a period beyond the fixed rate term.
Fixed rate mortgages come with a fee. These fees are typically higher than fees for other types of mortgage.
'A few of the lenders I contact to get the best deal for you'
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30 Dec 08, 11:12:31
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