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• Mortgages
• Fixed rate mortgages

Fixed rate mortgages

Which to choose? A variable rate or a fixed rate mortgage? This is the eternal dilemma of the modern mortgage shopper, since no one can ever be sure what is going to happen to interest rates. The good news is that you don’t need to be able to accurately predict what’s going to happen with interest rates and the economy to work out whether or not a fixed rate is a good option for you. The key things to look at are your own circumstances – your budget and whether or not you are willing or indeed able to take a risk.

Here’s how it works:

Say you opt for a variable mortgage deal whose rate tracks the Bank of England Bank Rate (known as a tracker mortgage). If the Bank Rate (often referred to as Base Rate) falls, then your monthly mortgage payments fall. However, if Bank Rate rises, then so do your mortgage payments.

So you face the risk that interest rate rises could make your mortgage more expensive each month, but you also have the potential benefit of cheaper mortgage payments if rates fall. If you’re willing to accept this risk of potentially higher payments in order to get the cheapest possible mortgage deal (and if your budget can afford higher payments), then a variable rate deal could be right for you.

However, if your budget is tight and/or you’re concerned about how you might afford higher mortgage payments, then it might be wise to look at a fixed rate mortgage.

Although you will typically pay slightly more for a fixed rate deal, for many people the added security of knowing that their rate is fixed is worth paying a premium for. You may find that a fixed rate deal enables you to budget more easily and gives you the peace of mind that your payments will remain the same, no matter what happens to interest rates. After all, your mortgage is not supposed to give you sleepless nights!

It is for this reason that fixed rate mortgages are often popular with first time buyers who’ve never had a mortgage before and with people anticipating a change in their circumstances, i.e. starting a family or a new job.

Whilst a broker cannot predict the future, they can give informed, expert opinion on the current market and help you make a decision by looking at your circumstances and your budget.

To speak to one of our expert advisers, call 0800 953 0304 or request a call back below.