Should I Fix My Mortgage Rate?

At Newcastle Building Society, we appreciate how important it is to get the right mortgage deal to suit your individual circumstances. Whether you’re just starting out on the property ladder as a first time buyer, or you’re thinking about switching mortgages, you will need to decide whether or not you want to fix your mortgage rate. Below, we explain the features of a fixed rate mortgage, so you can make an informed decision as to whether this type of mortgage is right for you.

What is a fixed rate mortgage, and what are its features?

A fixed rate mortgage means that the rate of interest that you pay on your mortgage will stay the same for a set period of time. You may be able to choose from a range of terms for your rate to be fixed – from two years, all the way up to ten years. Some lenders may also refer to this term as the ‘incentive period’.

What many people like about fixed mortgage rates is that your monthly payments will stay the same for the agreed fixed term. So, regardless of any fluctuations in interest rates, you will always know how much you will need to pay each month, which can be really helpful when budgeting your money.

When your fixed term ends, your mortgage deal will revert to your lender’s Standard Variable Rate, which means that your monthly payments could go up as well as down. At this point, you can consider switching to another fixed rate mortgage deal if this type of mortgage is still suitable for your circumstances.

The main features of fixed rate mortgages for you to consider are:

  • You won’t be affected by any fluctuations in interest rates, or the Bank of England base rate.
  • Your mortgage payments will be the same every month – which offers peace of mind for many people and offers them an advantage with budgeting their finances.
  • If you wish to pay off your mortgage before your fixed term ends, you may be liable to pay Early Repayment Charges which may be up to 5% of the amount you repay.
  • Your mortgage will revert to your lender’s Standard Variable Rate when the fixed term comes to an end, which could be lower or higher than the fixed rate of interest you were paying.

Should I fix my mortgage rate?

The decision of fixing your mortgage rate should be guided by your individual circumstances, as well as your financial plans for the future.

You may find the following questions helpful in making your decision:

  • How important is it to you that your monthly outgoings are the same every month? – Some people like to know exactly how much their mortgage payments will be every month, whereas others may not mind that their payments could go up or down.
  • How long would you want to fix your mortgage rate for? – Your fixed rate mortgage term could be from two years, to ten years, so you may want to think about your long-term financial plans. Even if you are planning to move home, you may be able to port your mortgage and transfer it to your new property.
  • How soon do you want to pay off your mortgage? – Paying off your mortgage before the fixed term ends may leave you liable to Early Repayment Charges. (ERC)

We hope you have found this blog post on fixing your mortgage rate useful, but should you require any more information, you can speak to one of our qualified mortgage advisers on 0345 606 4488 or book an appointment at your local branch today. Alternatively, take a look at our Mortgages Guides for more helpful advice on finding the right mortgage deal for you.