As more people are starting to join the housing market post lockdown, we are seeing a lot of new buyers questioning if a fixed-rate mortgage is for them. Read on to see what fixed-rate mortgages are all about.
A fixed-rate mortgage enables you to fix your mortgage at a set interest rate for a specified period. The main benefit of this type of mortgage is that you’ll know exactly how much your monthly repayments will be for the fixed-rate period. The main selling point for a fixed rate is stability. Whatever happens to interest rates during this time, whether they go up or down, your payments will remain the same.
This is helpful when it comes to peace of mind and monthly budgeting. You won’t have to worry that your payments will increase if interest rates do.
So what are the different types of fixed-rate mortgages?
Fixed terms can range from 2 all the way to 10 years and sometimes even longer. As a rule of thumb, the longer your fixed rate is, the higher the rate will be. Shorter-term fixed rate deals tend to cost less than longer-term fixed-rate mortgages, so 2-year fixed-rate mortgages are often considered to be the cheapest fixed rate deals available.
They are likely to suit you if you only need budgeting certainty for a short period of time. A lower term fix rate mortgage may also appeal to you if you are considering moving to another property in a few years.
Longer-term 10-year fixed-rate mortgages tend to be a bit more expensive than the lower fixed-rate mortgages, but you’ll have certainty that your payments won’t change for longer.
Word to the wise.
Bear in mind that many fixed-rate mortgages charge a penalty, known as an Early Repayment Charge (ERC) if you pay them off before the end of the set period. If you’re considering locking into a 10-year fixed-rate mortgage, you’ll need to think carefully about whether your circumstances are likely to change over time.
If your fixed-rate mortgage is coming to an end and it is time to remortgage, get in touch with our team at Arrow today.
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The information contained in this article does not constitute financial advice or recommendation and should not be considered as such. Arrow conveyancing does not offer financial advice and is not regulated by the Financial Conduct Authority (FCA), the authors of this article are not financial advisors and are therefore not authorised to offer financial advice.