Fixed Rate Mortgages

The fixed rate is a variation on the repayment theme, which allows you to know for a period of time exactly how much you're going to be paying each month.


Monthly repayments usually rise and fall with interest rates, but a fixed rate mortgage provides a guaranteed interest rate for the duration of the arrangement which is going to be something like the first two or three years of a mortgage, after which the repayment will revert to the variable rate.


The benefit of this type of mortgage is that borrowers know exactly how much they're going to have to pay and so can budget accordingly, with no fears of a sudden hike in interest payments. If interest rates rise above the level of the fixed rates, then people with this type of mortgage can feel suitably smug. But if rates fall, they're going to be fixed at a rate higher than everyone else is paying.


There is no magic formula for knowing whether a fixed rate is going to work in the borrower's favour, so its strongest selling point is as a promise of stability and predictability in terms of monthly outgoings.


If you're considering a fixed rate, check if there are any
kind of tie-ins or penalties to keep you after the fixed rate finishes.