With fixed-rate mortgages, you know how much your interest payments will be every month for a period of at least one year up to around 10 years.
The benefits of having a fixed-rate mortgage
The most obvious advantage of having a fixed-rate mortgage is that the interest rate is fixed for a set period. This means you always know during that time how much your mortgage payments are going to be. So no matter whether the Bank of England base rate goes up or down, it doesn’t affect what you have to pay. This fixed-rate only lasts for a set period; once this comes to an end, the mortgage interest rate rises to the (usually higher) lender’s standard variable rate.
The disadvantage of having a fixed-rate mortgage
The Bank of England base rate can go down as well as up. This means, if it does, you could be paying a higher rate of interest than if you had a tracker or variable rate mortgage. There can also be a premium attached to a fixed-rate mortgage for the security it gives, in contrast to a variable-rate mortgage. Then there’s the early repayment charge that is normally applicable with fixed-rate mortgages.
When you’re thinking about a fixed-rate mortgage, as with any mortgage type, you need to consider all the pros and cons that come with it. This would include the deposit that’s required to get a particular fixed-rate mortgage. To access the lowest rates, you may have to put down a deposit of 40%. Don’t just look at the headline rate but make sure you know about any additional fees/charges that are attached to an attractive lower interest rate.
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