Whether you’re a first-time buyer, moving home or remortgaging, you might be wondering whether you should fix your mortgage interest rate and how long to fix for – especially in the current market. Here’s our simple guide to fixing your mortgage, so you can make the right decision for you.
What are fixed-rate mortgages?
A fixed-rate mortgage is a type of mortgage where your interest rate stays the same for a certain time period, usually between 2 and 10 years. This means you’ll pay the same amount towards your mortgage every month for the duration of your fixed deal.
Why fix your mortgage?
The main advantage of a fixed-rate mortgage is that you know exactly how much you’ll be paying towards your mortgage each month, so you can budget more effectively. If you’re worried about interest rates and therefore your monthly repayments rising, fixing is a good way to give yourself peace of mind. However, that works both ways – if interest rates fall while you’re locked into a fixed deal, you won’t benefit from lower monthly repayments.
Is now the ‘right’ time to fix?
While mortgage interest rates have started falling, they’re still relatively high compared to recent years and the market is still stabilising. Trying to predict if and when rates will fall is a difficult game – even for the economists who do it daily. So, rather than trying to time your mortgage application perfectly, weigh up whether you could afford the repayments at current rates. If interest rates do fall while you’re in your fixed deal, you could have a nice surprise when you come to remortgage!
Should you fix for 2, 3, 5, 10 years – or longer?
When deciding how long to fix your mortgage for, these are the four key things to consider.
- Affordability – Looking at your current and future income and outgoings, can you afford current mortgage interest rates? If interest rates rise, could you afford higher monthly repayments?
- Certainty – Is knowing the exact amount you’ll be paying towards your mortgage each month a priority for you?
- Life plans – Do you expect to move home, start a family or have more children in the next few years? If so, think about the effect on your income and outgoings.
- Early repayment charges – You’ll have to pay a charge to your lender if you leave your fixed deal early, which could cost you thousands. Factor this into your decision!
Moneybox mortgage brokers can help you weigh this up, whether you’re buying a home or remortgaging. They can also find the right mortgage for you, as they compare thousands of deals from over 90 lenders daily! Head in-app to Accounts > Mortgages to start a conversation.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your lender if you remortgage.
Moneybox Mortgages is provided by Moneybox Mortgages Ltd.
