FIXED RATE MORTGAGES
The interest rate you pay will stay the same throughout the length of the deal no matter what happens to interest rates.
You’ll see them advertised as ‘two-year fix’ or ‘five-year fix’, for example, along with the interest rate charged for that period.
Advantages
- Peace of mind that your monthly payments will stay the same, helping you to budget
Disadvantages
- Fixed rate deals are usually slightly higher than variable rate mortgages
- If interest rates fall, you won’t benefit
Watch out for
- Charges if you want to leave the deal early – you are tied in for the length of the fix.
- The end of the fixed period – you should look for a new mortgage deal two to three months before it ends or you’ll be moved automatically onto your lender’s standard variable rate which is usually higher.
Their interest rates will not change for a set period of one, two, three, five or ten years.
This means that the amount you pay each month will stay the same until the deal ends. Even if the lender's SVR or the Bank of England base rate goes up, you will pay the same amount until the end of the fixed term.
When your fixed rate finishes you will be charged the lender's SVR instead, unless you move to a new mortgage deal at that point.
For example: You take out a mortgage fixed at 4% for five years and the Bank of England base rate goes up after a year. You will carry on paying the same amount for another four years.
You can read more about fixed-rate mortgages over on Teito.
