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Fixed mortgage, variable rate, tracker, off set sometimes the jargon in the mortgage market can seem very confusing indeed. Today we are going to focus on one type of mortgage product – the fixed rate mortgage. Fixed rate mortgages are among the most popular type of product in the UK. The reason for this is that they allow people to budget over the fixed period of the loan. The mortgage is usually fixed for a defined period – usually 2 or 5 years. 

The key feature of a fixed mortgage is that the interest rate is set at a defined rate for that period. For instance, set at 5.25% for 5 years. With the fixed mortgage your monthly payments will be the same each and every month, come what may. This is unlike a variable mortgage which is subject to raises or decreases in the fluctuating interest rate. Think of all those people who wish they had fixed mortgages as the debacle with the Northern Rock unfolded and interest rates (and monthly payments) have risen sharply. Should you consider a fixed rate mortgage?

• Yes - If you need to budget and know exactly what your payments are each month
• There will be no surprises if interest rates go up

If you think that rates may rises in the future then it may be worth considering.

Always check the length of the fixed rate and consider how long it is worth tying yourself in for. What is a good deal for 2 years may not be the same for a 5 year period – because they may fall in this period

Always, always check to see if there are any redemption penalties if you redeem the mortgage in the fixed mortgage period. Remember you never know what is around the corner – you may get a new job in a different city, have more kids, etc, etc. The key thing is that you just never know.

Arrangement fees – do your figures
Arrangement fees are what lenders charge people in order to arrange their mortgage.These can vary widely and it is always worth shopping around, especially as if you have a relatively modest mortgage. Are you really saving so much with a fixed rate in relation to the arrangement fee?

Well, we hope to have shed a little light on the benefits of a fixed mortgage – the key thing is to shop around and compare lenders. To compare fixed rate mortgages from 100’s of local lenders simply fill in the quick application form on the right.

Related reading: Fixed Rate, Off Set, Tracker, Variable Rate