What is a Fixed Rate Mortgage ?

When you choose a fixed rate mortgage the amount you pay every month will be fixed for a specified period of time, typically  2 to 5 years are the most common periodswhatever happens to the Bank of England base rate and the standard variable rate offered by your mortgage lender.

What types of fixed-rate mortgages are on the market?

There are a massive variety of fixed-rate mortgage loans on the market. This type of loan generally lasts for between two, three or  five years sometimes longer periods can be available.

What happens when the fixed-rate mortgage term expires?

When a mortgage borrower reaches the end of their fixed-rate term, the interest rate on their loan reverts to the standard variable rate offered by the lender. This is generally considerably higher than the fixed-rate deal offered.

What happens if I want to remortgage before my fixed-rate mortgage term expires?

Usually in this instance lenders will charge something called an early repayment penalty if you wish to cancel your fixed-rate mortgage within the fixed period and transfer to another loan. Some cheaper fixed-rate mortgages, including some of the best fixed-rate deals on the market, will continue to charge an early repayment fee even beyond the fixed-rate period. This is known as a ‘tie-in period’, and borrowers need to be aware of it when they take out a fixed-rate mortgage.

Are some fixed-rate mortgages flexible?

Flexibility is a prized aspect of any mortgage loan, and some fixed rate mortgage lenders now offer deals with flexibility attached. This includes the ability to make unlimited overpayment with no charges.

What are the major advantages of fixed-rate mortgages?

What are the benefits of a fixed rate mortgage?

Fixed rate mortgages can be good for first time buyers and anyone on a budget who need the stability of a set monthly repayment. With a variable rate mortgage your payments may go up and down according to the Bank of England Base Rate. However with a fixed rate mortgage you have the security of knowing the exact amount you will repay each month for a set period, despite any changes in interest rates.

Having a UK fixed rate mortgage means the interest rate you will pay is set for a specified period. We have a range of fixed rate mortgage terms available, currently fixed terms of two to five years tend to be popular with our customers. Once the fixed rate period is at an end, your repayments will revert to the mortgage lenders standard variable rate so you need to ensure you can afford the mortgage now and in the future when the fixed rate ends.

What are the major disadvantages of fixed-rate mortgages?

The major problems with fixed-rate mortgages are early redemption penalties and extended tie-in periods. In a climate of falling interest rates, the lender’s SVR could go below the fixed rate, leaving you paying over the odds. Fixed-rate mortgages generally require an application fee to set up.