Is It the Right Time to Choose a Fixed Rate Mortgage?

It looks like fixed rate mortgages are set to be the mortgage type of choice as borrowers believe the only way for interest rates to go is up. This is of course true but the big question is WHEN interest rates will rise.

Interest rates are likely to increase later this year but no one knows for sure and when they do increase it will small values every couple of months, the Bank of England certainly won’t be hiking rates since this will curb an economic recovery, slow and steady. So there is no need to panic and while understandably many want the security of knowing what their repayments will be it isn’t quite the optimum time for all to sign up to a fixed rate mortgage.

Especially if you have a great deal at the moment, such as tracker that is close to the base rate then hold onto it until interest rates do start rising again. In the meantime while you are benefiting from low repayments, use the extra money to overpay your mortgage. Doing will see you shave hundreds, possible thousands of pounds from your loan and help you to repay it possibly several years sooner than originally planned.

If you don’t have a mortgage at the moment it may be worth going for a fixed rate mortgage now if you are only going to change within around six months. This will give you the security of knowing what your monthly repayments will be each and every month, perfect for those on a tight budget, allowing them to plan their finances around their mortgage.

Many are now opting for fixed rate mortgages with reports that demand for variable rate mortgages have halved since the beginning of this year and the majority of people asked in surveys stating they would choose a fixed rate mortgage.

If you do go for a fixed rate deal it is very important to think about the term that you will take it over. Consider at what stage the market will be at when your deal comes to an end. You may think you have found a great value two year deal however in two years the market is likely to have recovered and interest rates could be above four or five per cent. It may be worth comparing the longer term deals which will fix you in at a low rate when the whole term is considered as well as the fees attached.