Generally the longer you look to fix your mortgage the higher the interest rate is. Therefore, if you are looking for the lowest rate possible then it’s short term fixed rate you need. The downside is your mortgage will be up for renewal quicker and when you come to remortgage your payments might increase.
Mortgages are typically taken out and re-payed over a period of 15, 20, 25 years. Over that period the interest rates will move (either up or down). As a result on a variable rate mortgage your monthly repayments are subject to change. People often worry about interest rate rises, particularly after such a long period of low rates as we have enjoyed over the past ten years.
Many people are expecting to see a rise in interest rates in the near future. As such fixed rate mortgages offer certainty to the borrower, allowing forward planning of monthly outgoings, with the assurance of no sudden rise in the monthly mortgage repayment
If you don’t like the idea of sorting out a remortgage so quickly then a medium-term fixed rate would be the way to go. Five year fixed rates are popular and you have certainty that your monthly payments cannot increase in the foreseeable future. There is a risk that interest rates might drop meaning you are paying more than you might have been had you fixed for a shorter period.
There are only a limited number of 7 and 10 year fixed rates mortgage deals on the market. These have always been the least popular. Customers tend to feel this is too long to fix in for as a lot can change in a decade! These are the most expensive fixed mortgage products available.
When choosing your mortgage deal be careful watch out for booking and arrangement fees. A booking fee is payable up front and an arrangement fee is payable on completion. Some people add fees to their mortgages, but this increases the total amount repayable as interest accumulates on the fee.
If you are taking out a small mortgage then it is more likely that you would want to take out a mortgage with no fees, even if a slightly higher rate of interest applies. The opposite applies if you are taking out a medium or large mortgage, your Advisor will help you with this tricky decision.
Choosing a mortgage requires consideration. There isn’t a single mortgage product that suits everyone. Your selection will depend on your personal circumstances. For example, if you think you may be moving in the next two or three years you may wish to choose a fixed deal for that period. (It is possible to ‘port a mortgage’ but you may be better discussing this with your mortgage advisor in advance). If this is your final move, perhaps a longer-term fixed rate may be more suitable.
One final point worth remembering is that with a fixed rate, if mortgage interest rates fall, you are still pay the agreed higher fixed rate.