Fixed Interest Rate Mortgage

A fixed rate mortgage allows you to repay interest at a fixed rate, irrespective of the BOE's base rate fluctuations. In other words you your monthly repayments will remain the same every month for a time period agreed between you and your lender (usually between 1 and 25 years). Once this period ends your mortgage will be transferred to a standard variable rate mortgage.

Usually with a scheme like this, where there is a fixed period involved, there is a redemption penalty charged for leaving the mortgage before the fixed rate term has ended. You may sometimes find that this period continues after the fixed rate period finishes. This means you could find yourself tied into the mortgage for several years after the fixed rate period has ended. If the lenders SVR is high you are stuck with it, unless you pay the overhanging redemption penalty in order to leave the mortgage.

This is why the lenders SVR is often the most important factor to consider when choosing a mortgage deal. You may have a low fixed rate for a number of years, but if you are tied in for several years after the fixed rate has ended, you might find yourself paying a high SVR and losing all that you gained.

A fixed rate mortgage is most suitable in certain situations. If the BOE's base rate is fluctuated unpredictably a fixed rate mortgage might be a good one to go for because your payments are fixed and will remain the same so you can budget more easily. If the BOE's base rate remains consistently lower than your fixed rate then you would stand to lose a lot of money unless you could come to an agreement with your lender. However if the BOE's base rate remains consistently higher than your fixed rate then you stand to gain a lot of money.

A lender might require a non refundable fee up front booking fee to be paid on application to reserve the mortgage. Arrangement fees are also frequently experienced with this type of rate.

Another disadvantage associated with a fixed rate mortgages is that a lender might require a non-refundable up front booking fee to be paid on application to reserve the mortgage. Arrangement fees are also frequently experienced with this type of rate.

The Mortgage Helpline (UK) Ltd is an appointed representative of Home Of Choice Ltd which is authorised and regulated by the Financial Services Authority. Commercial Mortgages and some Buy to Let mortgages are not regulated by the Financial Services Authority. Your home may be repossessed if you do not keep up repayments on your mortgage.