A fixed rate mortgage will guarantee that your interest rate and mortgage payment will remain unchanged for an agreed period, regardless of market conditions.

This option will give you protection against rate increases, and the ability to budget your monthly expenditure.

The length of a fixed rate mortgage usually lasts between two and five years, but when this period comes to an end you are most likely to be transferred onto the lender’s SVR.

Although a fixed rate mortgage is going to protect you in times of increasing interest rates, recent market conditions have shown us that it may cause you to pay well over the odds. When the Bank of England Base Rate is low, mortgage borrowers will benefit from low variable rate mortgages. If you are still in the initial fixed rate period, you are forced to either sit out paying a potentially higher monthly payment, or pay the early repayment penalty that will apply to exit your product early.

Advantages of a fixed rate mortgage

  • You have the ability to plan your monthly expenditure and budget
  • If interest rates increase, your fixed rate will stay the same

Disadvantages of a fixed rate mortgage

  • The best fixed rate deals often charge high arrangement fees.
  • If interest rates fall, your fixed rate mortgage will not
  • If you wish to move home during the fixed rate period and want to change lender, you may incur early redemption charges