Some people think interest rates may be on the way up. It could therefore be a good time to snap up a fixed-rate deal.
For many of us, our mortgage is our biggest monthly outlay. So if you're looking to free up a little more cash each month, it's an excellent place to start looking. For example, you could go for a cheaper standard variable rate or even a new fangled offset mortgage.
Alternatively, you could look at a fixed-rate mortgage. As it happens, in the last week or so, we've seen a rash of advice encouraging people to rush out and get fixed-rate deals while they can in the belief that the next movement in interest rates is likely to be upwards.
There are still some good deals around. One fax that wafted through Fool HQ today detailed the latest rates from Royal Bank Of Scotland
(LSE: RBS)
. Among the various deals they have on offer are a two-year fix at 3.75% and a five-year fix at 4.35%. Both of these deals require a minimum deposit of 5%.
There are costs when you switch your mortgage though. Many fixed-rate deals have application fees and you also have to consider legal and valuation charges, too (although these are often refunded). You also have to account for any redemption fees attached to your current mortgage and consider the level of redemption fees that apply to the new fixed-rate deal you're looking to get.
Taking all these amounts into account and trying to second-guess what will happen to mortgage rates in future is a tricky game, to put it mildly. That's why I think the main attraction of a fixed-rate deal is the comfort of knowing exactly how much you'll pay out each month. If you're on a tight budget, and can't afford for rates to rise, then a fixed-rate deal makes a lot of sense.
Choosing how long to fix your mortgage for is also something to consider. The longer the fixed-rate term, the higher the interest rate will be. That said you may well be better off with a five-year deal rather than looking to remortgage again after a two- or three-year fix has run its course. Most important of all, make sure you're prepared for when the fixed rate ends and are aware of how much more you'll need to pay each month by keeping an eye on the lender's standard variable rate.
More: The Fool's Mortgage Centre
