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Fixed Rate Mortgages

Fixed rate mortgages offer a certain amount of security when it comes to your monthly payments.

Fully fixed mortgages are still relatively uncommon in the UK. However, mortgages that have a fixed interest rate for a predetermined period at the start of the loan are becoming increasingly popular.

It is usually the first few years after buying a home that put the most strain on people's budgets. This is where fixed rate mortgages can come in useful. They give your certainty over what your monthly payments will be, so you know where you stand from month to month and can budget more easily.

Fixed Period

The fixed rate period will vary from loan to loan. Once this period is over the interest rate on your loan will revert to a standard variable rate. Depending on what has happened to interest rates over that time, you may find yourself with a sudden rise or fall in your monthly payments.

Fixed rate loans simply protect you from rising interest rates over the fixed rate period. The downside is that you won't benefit from lower monthly payments during that time, even if interest rates fall substantially.

Fees

You may find that mortgage fees are higher with fixed rate loans and this is fairly common. You should also look out for additional penalties. For example, some fixed rate loans may charge penalty fees if you make extra payments or pay off your loan in full within the fixed rate period. If you think that you might move house again before the fixed rate period has ended, you should take this into account.

As with other types of mortgages, it is a loan secured against your home and as such your home may be at risk if you cannot keep up repayments on your mortgage.