Fixed Rate Mortgages

A fixed rate mortgage is one where the lender offers a rate that is fixed for a specific term. 

This means that your mortgage payment will always be the same for that term irrespectiveof the Bank of England base rate changing or the lenders
standrad variable rate changing.

How Long Can I Fix My Mortgage For?

Lenders offer fixed rate terms from 1 year up to 25 years.  The most common terms offered are 2, 3 and five year terms.

What Happens At The End Of The Fixed Rate?

At the end of the fixed rate you normally revert to the lenders standard variable rate which is often higher than the fixed rate.  Most fixed rates have no extended penalties which means that once you have finished the fixed rate term and you revert to the standard variable rate, you are free to select another product from the lender or remortgage to another lender without having to pay a redemption penalty.

What Are The Redemption Penalties For Fixed Rate Mortgages?

Redemption penalties vary from lender to lender and are usually anywhere between 1% and 5% of the loan amount.

Are Fixed Rate Mortgages Flexible?

A lot of lenders now offer an overpayment facility whereby you can overpay your mortgage each month up to a certain limit (set by the lender) without incurring redemption penalties.  There are some fixed rate mortgages available now that give you the security of a fixed rate but also the ability of making overpayments without limit.

What Are The Advantages To A Fixed Rate?

The advantages to a fixed rate are that you can set a budget for your mortgage payments.  You can be sure that for a set term your payments will always be the same irrespective of the Bank Of England base rate going up or the lenders standard variable rate increasing.

What Are The Disadvantages To A Fixed Rate?

The disadvantages are that rates can go up as well as down.  The Bank Of England could drop their rate significantly meaning those on tracker mortgages or standard variable rates mortgages could see their payments deccrease.  If you have a fixed rate your payments would remain the same.