Fixed Rate Mortgages

Fixed Rate Mortgages

Whatever happens to interest rates during a fixed rate, whether they go up or down, your payments will not change.

How does a fixed rate mortgage work?

During the fixed rate period your payments will remain the same. Whatever happens to interest rates during this time, whether they go up or down, your payments will not change. This can be a great help when it comes to budgeting. It also provides valuable peace of mind, that you won’t suddenly see your payments increase if interest rates go up. 

So, while you’re protected if rates go up, you could find out that you end up paying too much if interest rates fall during the fixed rate period. It might be an idea to chat this over with a mortgage adviser.

There’s a wide range of fixed mortgage rate deals to choose from, with fixed rate periods ranging from 1 to 10 years, or even longer. The interest rate you pay varies. A lot depends on how long you fix your mortgage for when it comes to rates.

At the end of your fixed rate term, your mortgage provider will usually switch you to their standard variable rate (SVR). Chances are this rate will be a bit higher than your fixed rate. If you do nothing when you reach the end of your fixed rate you will move to, and stay on, this SVR until you reach the end of your mortgage or change to another deal. You may decide to lock into another fixed rate deal when your current fixed rate finishes.

If you want to change to a different deal or repay your mortgage in full before the initial fixed rate period ends, you need to be aware of early repayment charges. Most fixed rate mortgages allow you to make over payments, typically up to 10% of the outstanding balance of your mortgage per year.

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Which fixed rate mortgage should I get?

The best fixed rate mortgages have a tendency to get used up very quickly.

The best fixed rate mortgage for your circumstances will depend on several factors, including:

  • how long you want to fix for
  • whether over payments are required
  • your home buying future decisions
  • future personal financial decisions

When comparing mortgages, there are a few things to pay attention to. First and foremost, there’s the fixed rate. Typically, the more deposit you have the better your mortgage rate will be.

It’s not all about the fixed rate though. Fees are an important consideration when choosing a fixed rate deal. Mortgages with particularly low rates may look attractive, but may come with expensive arrangement fees, which can reduce the benefits you might enjoy from a lower rate.

If your mortgage is relatively small, you may prefer to choose a fixed rate mortgage with a slightly higher rate and a low or no fee. If you’re borrowing a large sum, you may find it more cost-effective to go for a fixed rate mortgage with a lower rate and a fee.

Search for your own deal

Finding a mortgage rate and monthly cost is easier than you might think. There’s a couple of options you can use:

Book an online appointment 24 hours a day, 7 days a week. Use the call back option widget. Search yourself with the find a mortgage tool. You can also find out how mortgages work. The Money Advice Service has a great range of guides if you can’t find what you’re looking for at MDFS.

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