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Many people prefer the certainty of fixed-rate mortgages because you always know exactly how much your monthly mortgage payments will be during the term of your fixed-rate period.
Some home owners, particularly first-time buyers, like the certainty of a set monthly payment figure that will remain the same even if rates were to suddenly increase. This makes a fixed-rate mortgage a popular choice, particularly while rates are low but could rise at any time.
On the other hand, if there was a fall in interest rates then you wouldn’t benefit from it during your fixed period as your monthly payments remain exactly the same.
Interest rates have remained low for a number of years now, but there have been indications that they could increase. No-one can really predict the financial future, but if this rise did happen then fixing into a low rate now, while you still can, might be a good move.
You can usually fix your mortgage for two, three or five years. But some lenders offer long-term fixes of ten years or more.
At the end of the fixed rate period your payments will generally revert to the lender’s standard variable rate (SVR) unless you decide to move to another deal.
The interest rates on fixed rate mortgages do tend to be slightly higher than those on the best variable rate deals. That’s because you’re paying for the security and peace of mind that comes with the certainty of fixed monthly repayments.
It’s also worth remembering that most providers will charge you a penalty – known as an early repayment charge (ERC) – if you decide to exit the mortgage deal or make overpayments before the end of the fixed term.
Just get in touch with the mortgage experts at Bower to find out more and see how we can help get the right mortgage for you