Most mortgages are lent over the medium to long term (15 - 30 years) and over that time period the cost of borrowing set by the banks and/or the Bank of England usually varies. A mortgage where the initial interest rate might have been 4 - 5% might slowly (or suddenly!) become 6 - 7 % (or more - or less). In the 1980s, mortgage rates in the UK sky rocketed into the mid teens, leaving many with huge mortgage repayments and a real headache.
As the name suggest, a ‘fixed rate mortgage’ is a mortgage that has an agreed rate of interest fixed at the start of the loan. It won’t vary in line with the Bank of England Lending Rate, LIBOR or the mortgage company’s Standard Variable Rate (SVR) for the fixed rate period.
A fixed rate mortgage offers certainty to the borrower and can be attractive to those borrowers on tight budgets or in jobs with no prospect of significant growth in salary in the foreseeable future. They are also worth considering when interest rates are historically low, although the downside is that you could pay a higher initial rate on a fixed rate mortgage than you would on a variable rate.
Most borrowers interested in a fixed rate product will take an initial fix in interest rates of between one and five years, with the loan then reverting to the lender’s SVR or a rate linked to LIBOR or the Bank of England Base Lending Rate.
It is worth noting that fixing a rate also means that if mortgage rates fall, you are still paying the original (higher) rate. For this reason some people will seek out capped rate mortgages, which will generally protect you against rate rises but still allow the rate to fall with the market.
Whatever you decide, it’s best you choose a product that best suits your needs at the time and for the foreseeable future.
For more information contact us or speak to an adviser on 01628 507477.
Related article:
Recent posts
Choosing to buy a house is one of the biggest decisions you are likely to make in your lifetime. There are many factors that influence a house purchase, these include: finances, housing market conditions, and mortgage rates.
ISAs: what are they, and which one is for me
3 days ago
Since being launched back in 1999 Individual Saving Accounts (ISAs) have been very popular for those wanting to put money into savings. There are four types of ISA, and the majority allow flexible saving and the ability to withdraw funds easily. There are financial penalties on certain products, these usually pay the most interest.
Benefits of buying a new build home
10 days ago
According to the Office for National Statistics, last year (ending March 2024), there were 153,800 new homes completed in the UK. To help the housing crisis, the UK government has pledged to build 1.5 million new homes in the next five years.
Check out some of the reasons why a new-build home might be for you.
Many households are still being affected by the high cost of living, with several people worrying about how they can make ends meet on a monthly-basis. Unfortunately, the cost of bills including, water, council tax, and energy are still rising. Here are some things you can do.
The Renters’ Rights Bill represents a significant milestone designed to enhance the rights and protections of tenants in the rental market. This comprehensive bill aims to foster a more balanced and fair rental sector, ensuring that tenants can enjoy greater security and equitable treatment. It is likely to become law in late 2025.
Limited Company vs Single Name Buy to Let
7 Feb 2025
Owning a buy-to-let property in your sole name versus through a limited company each has its own set of advantages and disadvantages.
Top 10 property price hotspots in 2024
1 Feb 2025
Data from Rightmove shows that Sunbury-on-Thames in Surrey was the number one house price hotspot in 2024. The prices in this area climbed an impressive 12.5% - increasing from an average price of £527,005 in 2023 to £592,926 in 2024.
Buy to Let Stamp Duty Changes April 2025
29 Jan 2025
On the 31st October 2024 stamp duty for those purchasing additional properties increased by 2% from 3% to 5%.
From 1st April 2025 the threshold will be reducing from £250,000 to £125,000
More information
Trusted by
