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More about fixed rate mortgages
Fixed rate mortgages FAQs
How does a fixed rate mortgage work?
A fixed rate mortgage will have the same rate of interest for the length of a set period of time known as the mortgage deal. When the deal period ends, the mortgage rate reverts to the lender's Standard Variable Rate (SVR).
What are the benefits of fixed rate mortgages?
Fixed rates offer security and peace of mind. With a fixed rate mortgage you'll know exactly how much you'll be paying for the length of your mortgage deal. This means you can budget accordingly and you're protected from potential interest rate rises.
What are the downsides?
Traditionally fixed rate mortgages have always been slightly more expensive than variable rates. However, that is no longer the case, with a number of competitively priced fixes on the market which match or even beat variables on rate.
The biggest downside of a fixed rate at the moment therefore is if interest rates were to fall you wouldn't feel the benefit. Your monthly repayment would stay the same.
Is a fixed rate mortgage right for me?
If you like to know exactly what you're going to pay then yes, a fixed rate is right for you.
How long can I fix for?
You can choose to fix for two, three, five or even ten years.
What if I want to leave?
If you decided to pay off your mortgage before the fixed rate period is over you're likely to face an Early Repayment Charge. These charges vary from product to product but are usually set as a percentage of the loan, with the percentage reducing the closer you get to the end of your deal.
Will I pay a higher rate for a fixed rate mortgage?
Not necessarily. It used to be that fixed rate mortgages featured higher rates than variables but that is no longer the case. It's possible to get a competitively priced fixed rate that is in fact cheaper than a variable.
How can I compare fixed rate mortgages?
When comparing fixed rate mortgages it's important to remember the rate is not always the most important factor. A product with a low rate may seem like the most cost effective option but if it comes with a hefty arrangement fee it may not be the best option. Know Your Money's free to use comparison tool allows you to sort fixed rate mortgages by rate, fees and overall cost, helping you to work out the cheapest product for your circumstances.
What happens when I'm nearing the end of my fixed rate period?
When your fixed rate period ends you'll move on to your lender's Standard Variable Rate. You can either choose to stay on this, move to another deal with the same lender or remortgage with another provider. As you approach the end of your fixed rate period it's worth comparing mortgages on the market to get an idea of the type of deals on offer to you.