Fixed Rate Mortgages - Pros and Cons
Fixed Mortgage Interest Rates Mean Stable Mortgage Repayments
Dec 11, 2008
Over the past decade mortgage interest rates have varied wildly. The fact remains that times are uncertain so fixed rate mortgages are popular as a means of locking mortgage interest rates at an affordable level and creating certainty.
Data provided by the Council of Mortgage Lenders shows that fixed rate mortgages account for 70% of all mortgages taken out in Britain. Whilst 2-year fixed rate deals are currently the most common, 5- and 10-year fixed rate mortgages are growing in popularity.
Use a Mortgage Comparison Service to Identify the Lowest Mortgage Interest Rates
Using a mortgage comparison service helps identify the cheapest fixed interest mortgages. Rates will vary considerably between lenders so using an independent mortgage broker can help in terms of identifying the best mortgage deals.
Which Way are Mortgage Interest Rates Going?
Look at recent history to identify the swings in mortgage interest rates. Locking in at a high level can prove to be an annoying and costly mistake. Fixed rate mortgage are something of a gamble, but stability is priceless during times of uncertainty.
Advantages of Fixed Rate Mortgages
- Certainty. Huge swings in mortgage repayments can be very unsettling, especially for first time buyers and those on fixed incomes;
- Protects against the rising tide of interest rate increases. During times of rising inflation, interest rates have been known to go above 10%. Whilst nobody predicts the direction of mortgage interest rates correctly every time, consistent affordability can be a price worth paying;
- Prevents anxiety and health problems. Many people don't deal at all well with not knowing where they stand. Fixed rate mortgages help people to sleep at night and avoid health problems as a result of stress and worry;
- Allows easier budgeting. The certainty of knowing precisely what monthly mortgage payments will be makes it considerably easier when budgeting.
Disadvantages of Fixed Rate Mortgages
- Application fees. Arranging fixed rate mortgages usually involves paying an application fee;
- Interest rates move the wrong way. There is a tendency for people to panic and lock into a rate that has been rising just before it comes down;
- Redemption penalties. Should lower mortgages interest rates become available, it isn't possible to switch without paying an early redemption penalty;
- Not available to higher risk borrowers. High risk borrowers, such as those who cannot prove their earnings, are far less likely to be eligible for fixed rate mortgages.
Fixed rate mortgages are excellent for those requiring financial certainty. Get the best mortgage deals by using a mortgage comparison service as this will allow the borrower to minimise monthly mortgage payments.
Those considering getting a fixed rate mortgage may also be interested in Identifying ways to reduce credit card balances and Reducing Energy Bills For Gas and Electricity.
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