How Long Should You Fix For?
3 minute read
Record low interest rates triggered by fears of post-Brexit vote economic stagnation have made 2016 the best year for fixed rate mortgages – ever. With the base rate slashed from a low 0.5% to an unprecedented 0.25%, mortgages are now (on paper) more affordable than ever before, while a new raft of quantitative easing measures have released billions into the economy in a bid to encourage banks to lend more to current and prospective home owners, as well as to businesses. If you’ve been flirting with the idea of buying a property, now could be the time to arrange a fixed rate mortgage. With base rate highly unlikely to dip lower than 0.25%, a fixed rate mortgage may be currently a very safe bet. But how long should you fix your mortgage for, and what are the risks of fixing? Here’s what you need to know.
Early Repayment Charges Can Sting You
If you’re not entirely sure of your future plans, a shorter term fixed mortgage could still be a smarter idea. If you decide to keep the property, you may have to swallow a higher interest rate once your fix elapses, but if you choose to move on, you’ll avoid some of the potentially rather nasty early repayment charges which can leave you out of pocket if your current lender is unable to assist. If you know you’ll be making a move soon after arranging your mortgage or your circumstances are due to change that merits a review of your borrowing requirements, it may be best to consider a fixed mortgage that lasts for an appropriate time frame.
Short Fixes are Cheaper in the Short Term
The longer the term of the fix the higher the rate will typically be. If you are working to a tight budget for the first year or two a shorter termed fixed mortgage may be the better prospect. Shorter term fixes could also be the ideal option should you wish to review your mortgage along with any changes in your personal circumstances.
Longer Fixes May be More Cost Effective
Longer term fixes such as five year rates could suit if you wish to have the financial stability over this period of time. Giving the assurances of a set payment will give comfort to those that like the knowledge of what their mortgage expenditure will be. The longer term commitment may come with certain restrictions so security over flexibility is generally the rule to apply. Would you like to learn more about securing the ideal mortgage for you? Ask the Just Mortgage Brokers experts today: 0800 114 3553