What is fixed rate?

A fixed rate simply means that you pay the same interest rate, regardless of market interest rates and fluctuations, over the time of your mortgage. Most fixed rates last for between 2 and 5 years, although it is possible to fix your rate for up to 10 or even 25 years. Once your fixed rate expires, you will usually revert to your lenders standard rate, although a few deals now a days revert back to a base rate tracker.

The Advantages of a fixed rate.

1. If you find it hard to cope with rising interest rates and mortgage repayments, a fixed rate offers you stability and safety, as the interest rate will stay the same throughout a specified period of time.

2. You can be speculative, and have the possibility of saving vast amounts of money by choosing a fixed rate when interest levels are low.

The Disadvantages of a fixed rate.

1. There is usually an arrangement fee or booking fee when it comes to this type of mortgage, and remember that if you don’t follow through with the deal then you wont get your money back.

2. Fixed rate deals often have higher interest rates than special offers or discounted deals if it is thought that interest rates are likely to rise.

3. If you want to get out of the mortgage during a fixed deal then you will have to pay an early repayment charge, also known as a redemption penalty that can cost hundreds, even thousands of pounds.

4. When your fixed interest rate expires, it is the norm that you switch to your lenders interest rates, which are usually considerably higher than what you were originally paying, and you will only be able to switch deals if you pay a redemption penalty.