Which mortgage type has the best interest rate?

Mortgage interest rates have started to climb over the last month as the swap rates that determine how much it costs lenders to lend to each other has risen. Fixed rates are the rates in question with most of the main lenders increasing their rates in line with the higher costs.

This may well indicate that lenders are predicting a market recovery in the near future, possibly around the end of the third quarter. As rates have climbed for most there aren’t many cheap fixed rate deals still available and the advice would be to certainly lock into a fixed rate deal as the remainder look set to follow the rest of the lenders.

You could opt for a variable rate mortgage which should or many experts have predicted would likely work out cheaper than a two or three fixed rate mortgage however in the region of 90% of new mortgages are fixed rate mortgages, people are clearly favouring the fixed monthly repayments. Knowing exactly what you are going to be repaying is great piece of mind and not having to worry about rates going sky high and the repayments being unaffordable.

As previously said there are now very few fixed rate deals left on the market so you are going to have to be quick if you want to lock in your mortgage. It is always worth having a look at all the offers on the market, if you like the idea of knowing what your repayments will be but have a bit of flexibility and want to benefit from the cheapest ">mortgage interest rate then have a look at capped tracker mortgages. They will track the Bank of England base rate at a set percentage above it but will be capped not to go above a set rate giving you that piece of mind while taking a small gamble that lower rates will benefit those on tracker mortgages.

There are different options to consider, have a good think over them taking into account different scenarios, and include fees applicable and if the option to overpay exists with mortgages selected. The general advice seems to be to fix if you are risk adverse but go for a medium term mortgage of around five years as the fee attached to two year deals makes it unattractive and will likely leave you looking for a new deal when the economy will be well on the way to recovery.