What's Included?
What is a fixed rate mortgage?
With a fixed rate mortgage, you can rest easy knowing that your interest rate is locked in for the duration of your loan term. This offers invaluable stability to both long-term and short-term financial planning.
With this mortgage, you can guarantee the stability of your budget by knowing exactly how much your monthly payments are for a predetermined rate period. Have comfort in understanding that you will never be caught off guard by any surprises or hidden costs – reliable and secure!
With a fixed rate mortgage, you can rest assured that your monthly payments will remain unchanged for however long you choose – 2 years? Or 5 years? 10 or more?! Unaffected by changes in interest rates during this fixed period, they won’t leave your wallet dry compared to variable and tracker mortgages contingent on Bank of England base rate fluctuations.
A fixed rate mortgage guarantees steady payments for the entire duration of your loan term, giving you peace of mind in knowing that your monthly repayment won’t unexpectedly surge if interest rates rise. Steady and secure budgeting is one benefit many homeowners appreciate with a fixed rate mortgage.
What are the different types of fixed rate mortgages?
When it comes to fixed rate mortgages, you have numerous options available; the tenure of these could go up to 10 years or even longer. The interest you will pay is determined by how long your mortgage term is – typically, a longer duration results in higher rates.
2 year fixed rate mortgages
If you’re seeking a fixed rate mortgage, the 2-year plan is your most effective option. This ensures that no matter what happens in terms of interest rates during the two years, your monthly payment remains constant – so you can budget without worry! A 1-year deal might be available out there, but it’s rarer than the 2-year offer; this way, you know that your payments won’t fluctuate over a brief period.
Interest rates on shorter-term fixed rate deals tend to be lower than on long-term fixed rate mortgages, so 2-year deals are often considered the cheapest fixed rates available.
If you’re looking for financial stability in a short time frame, then a two-year mortgage may be best suited to your needs. For instance, if you’re expecting to move house or refinance within the next few years, it can offer reassurance that you have secured a competitive deal with low repayment rates. Homeowners who want the most cost-effective solution should consider these types of mortgages!
3 year fixed rate mortgages
A 3 fixed rate mortgage guarantees that your monthly payments and interest rates will remain steady over three years. This is unlike other variable mortgages in which payments can fluctuate from month to month, making budgeting incredibly difficult. With this type of mortgage plan, you can benefit from the peace of mind of knowing exactly what amount needs to be paid each month!
This mortgage could be a great option if you want to save on your monthly costs. Rates are usually lower than those offered by 5 or 10-year deals. However, opting for the 3-year agreement may be slightly higher than the 2-year mortgage.
After the 3-year fixed rate mortgage period concludes, just like other fixed rate agreements, your mortgage will likely revert to the lender’s standard variable rate (SVR). Therefore, borrowers should search for a better deal before their term ends.
5 year fixed rate mortgages
Invest in your future with a 5-year fixed rate mortgage – reap the benefits of consistent and dependable payments for half a decade! Suppose you choose to secure a 5-year fixed rate mortgage. In that case, you can breathe easy knowing that your regular payments will remain the same throughout this duration, regardless of any changes in interest rates.
With a 5-year fixed rate mortgage, homeowners can enjoy the budgeting certainty of locking in their interest rates for an extended period. However, these deals tend to have slightly higher rates than shorter-term mortgages.
When searching for the best 5-year fixed rate mortgages, it is essential to consider the arrangement fees in addition to interest rates. Additionally, if you plan on moving within these five years, be sure that any deal you agree upon can be transferred and applied towards your new residence.
10 year fixed rate mortgages
With a 10-year fixed rate mortgage, you’re in control. Your interest and monthly payments remain the same for 10 years, no matter how external interest rates may change, allowing you to budget confidently!
With a 10-year mortgage, you pay slightly more than shorter-term mortgages like 2, 3 or 5 years. However, the benefit of this is that your payments are fixed for an entire decade – giving budget-conscious homeowners greater peace of mind in knowing their payments won’t fluctuate over time. When deciding on the best 10-year deal to suit your needs, consider the flexibility you might require throughout the coming years.
A 10-year fixed mortgage may be transferred to a new home if you relocate during the policy period. Although, you must reapply, submit for another round of affordability tests, and undergo a new property valuation.
Be aware that numerous fixed rate mortgages carry an Early Repayment Charge (ERC) if the mortgage is repaid before its pre-set period is completed. If you’re contemplating a 10-year fixed rate mortgage, consider your circumstances in advance to determine whether they will change over time. Will you make additional payments on top of your debts to pay off earlier than expected? Could it be possible that you’ll move residences soon? Think carefully!
These are all essential factors to consider before you take out a fixed rate mortgage. If you’re looking for a more straightforward, more efficient method of calculating your borrowing capacity and applying for a home loan, then the Credibble Home App is perfect. Download it now and start on your journey towards owning your dream home!
What happens when your fixed rate mortgage ends?
Once the fixed rate period ends, you will be shifted to the lender’s standard mortgage rate, the standard variable rate (SVR). Usually, the SVR is higher than the fixed rate you previously paid. Therefore, you might want to opt for another fixed rate deal when your present mortgage expires. The SVR differs for each mortgage lender and can be changed anytime by any amount.
You can get a new mortgage deal while still bound to your current mortgage. This is because most mortgage offers remain valid for several months after they are issued. Therefore, if you initiate the application process before your current deal ends, you can smoothly transition from one deal to another.
Frequently Asked Questions
1. What is a fixed-rate mortgage?
A fixed-rate mortgage is where the interest rate remains unchanged for a set period. This means that your monthly payments will remain the same for that period.
2. How long can you fix the interest rate?
Fixed-rate mortgages can be fixed for different periods of time, usually between two and ten years.
3. What are the advantages of a fixed-rate mortgage?
The main advantage of a fixed-rate mortgage is that you know exactly how much your monthly payments will be for the duration of the fixed term. This can help you budget more effectively.
4. What are the disadvantages of a fixed-rate mortgage?
The main disadvantage of a fixed-rate mortgage is that if interest rates fall, you will still be paying the same amount each month. You may also have to pay an early repayment charge to pay your mortgage early.
5. What happens when the fixed period ends?
When the fixed period ends, your mortgage usually reverts to your lender’s standard variable rate (SVR). This rate can be higher than your fixed rate, so shopping around for a new deal is important.
6. Can I overpay on my fixed-rate mortgage?
Most lenders allow you to overpay on your fixed-rate mortgage, but there may be limits on how much you can overpay without incurring an early repayment charge.
7. What happens if I miss a payment on my fixed-rate mortgage?
If you miss a payment on your fixed-rate mortgage, you may be charged a fee, which could affect your credit score.
8. Can I remortgage during my fixed term?
You can remortgage during your fixed term, but there may be early repayment charges to pay.
9. What is the average five-year fixed-rate mortgage rate in the UK?
The average five-year fixed-rate mortgage rate in the UK is 4.79% (based on 75% LTV) ¹.
10. Where can I find mortgages with shorter fixed terms?
You can find mortgages with shorter fixed terms by searching online or speaking to a mortgage broker 2.
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