Fixed Rate Mortgages

This type of product is ideal if you want the security of a guaranteed repayment figure for a set period of time, as the mortgage interest rate will remain the same for the stated period. In general this can be for a period of 2, 3, 5,10 or 15 years.  After the period finishes then the rate will revert to the mortgage lenders standard variable rate. An arrangement fee is often charged by the lender. An early repayment charge may apply.

 What does it mean for you ?

• Your payments will stay the same in that period, even if interest rates go up.
• This gives you the security of knowing that you can afford your payments and will make it easier for you to budget.
• If rates go down, you won't benefit. Your payments will stay at the higher rate.
• You may not be able to make overpayments and pay off the loan early without penalties.

Early Repayment Charges

Many fixed rate deals have an associated early repemption penalty. Most mortgage lenders offer a great mortgage rate for a set period, during which time, should you leave, or pay off the mortgage early, you could be liable for a charge. This is usually a percentage of the outstanding mortgage.

A number of lenders also employ an extended tie-in. In this case the early repayment charge is payable even after the fixed rate deal has ended. And as most lenders switch you to their standard variable rate (typically around 2% higher than base rate) this can result in you paying a lot for your home loan. Therefore it is usually best to avoid mortgage deals with extended tie-ins.  Your mortgage adviser should explain this to you at the outset.