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With a fixed rate mortgage, your interest rate is fixed for a certain amount of time - usually one
to five years - so you know exactly what to expect in terms of mortgage payments. Because of this,
a fixed rate mortgage is usually a good buy for people who need to know exactly how much their monthly
repayments will cost so they can budget accordingly.
The trouble with a fixed rate mortgage is if the general interest rate falls far below the figure
you’ve set your fixed rate mortgage at, you don’t benefit - rather, your mortgage provider does.
Because of this, fixed rate mortgages tend to be good value if interest rates look set to rise in the early
years of a mortgage. Be warned that a lot of research goes into the making of every fixed-rate mortgage.
If you have reason to believe interest rates are set to rise, your mortgage provider likely has the same
information and has used it to devise a fixed-rate mortgage that will still turn a profit if
the economy behaves as you both expect it will.
To find out more information visit our Mortgages notebook page.
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