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Secure a Fixed Rate Mortgage

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Many press articles are stating that we have already seen the best mortgage rates start to increase. With that in mind is it about time that if you are on a variable or tracker rate that you review your remortgage options, especially with some competitive Fixed Rate Mortgage Schemes available.

This page explains the pros and cons of Fixed Rate mortgages.

Fixed rate mortgages might seem simple at first glance, but it’s still worth reviewing how they work, and what to considerations there are.

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What is a fixed rate mortgage?

A fixed rate mortgage is simply a means of guaranteeing your mortgage payment over a set period of time. Fixed rates are for an initial period, typically anything from a 2 year to 10 years. After the fixed rate period ends your mortgage will go onto the Lenders standard variable rate (SVR

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How does a fixed rate mortgage work?

During the fixed rate period your payment will remain the same, regardless of what variable mortgage interest rates do. So while you are protected if rates go up, you’ll be paying over the odds if interest rates fall during the fixed rate period. Fixed rate mortgages normally have an Early Repayment Charge (ERC) if you want to remortgage or repay your mortgage during the initial fixed rate period. Most fixed rate mortgages will allow you to make overpayments, typically up to 10% per year.

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Fixed rate mortgages: Advantages

You know exactly what your mortgage payment will be, for a set period. If interest rates go up, your payments won’t. Your mortgage is likely to be your biggest monthly outgoing. Knowing what you’re going to be paying allows you to budget and plan your finances with more certainty

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Fixed rate mortgages: Disadvantages

Some fixed rate mortgages will charge a high arrangement fee If interest rates go down, your payments won’t – so you could pay more than the prevailing rate If you want to repay your mortgage early, or remortgage during the fixed rate period, you will have to pay an Early Repayment Charge When the fixed rate period ends you’ll go onto a variable rate. Depending on the interest rate climate, this could mean that your payments suddenly make a jump (although you can remortgage to a different lender, or arrange a new mortgage deal with your existing lender to save money)

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When you’re coming to the end of a fixed rate period...

Up to 3 months before the end of your fixed rate period, we will start to assist you to review your remortgage options, looking at the best remortgage deals available to see if you can save money or perhaps look at a future fixed rate for security. When your fixed rate ends you’ll go onto your lender’s Standard Variable Rate, or a tracker rate. These don’t offer the same payment security as a fixed rate, and, depending on the interest rate climate, could mean that your payment could make a sudden jump. On the flipside, it can sometimes be the case that the variable rate you go onto is lower than the fixed rate you’ve been paying. While this might come as a pleasant surprise, remember that if rates go up so will your payment – you could end up paying a lot more than if you had remortgaged to another fixed rate. If you do decide to stay on a lower variable tracker or standard variable rate, consider keeping your mortgage payment the same. This overpayment will reduce the term of your mortgage more quickly. You can get the wheels in motion for a remortgage several months before your fixed rate period comes to an end. Then you can simply wait till the fixed rate period finishes (to avoid any Early Repayment Charges) and complete your remortgage to a new fixed rate.

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Mortgage deals may not be available and lending is subject to individual circumstances and status.

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