What is a fixed rate?

A fixed rate is straight forward. You agree to a contracted period of paying a set amount for your mortgage payments. It doesn’t matter what happens to the Base Rate during this period, you have a contract in place to protect you from any potential rises. Just like the tracker product it usually has a product term of 2, 3 or 5 years. However, longer terms can be made available from certain lenders. For our example below we are going to be using a 10 year fixed rate starting in January 2006. As you can see at the end of your product term, if you do not remortgage / change product then the lender will look to put you onto their SVR rate. This could lead to a potentially higher rate which in turn means a jump in mortgage payments. This is called ‘payment shock’.

Some Key Features:

  • Usually has start-up costs like an arrangement fee charged by the bank.
  • As it does normally have a fixed contract date, it you were to finish your contract early, the bank may charge you an Early Repayment Fee.
  • You DO NOT benefit from any direct changes to the Bank of England base rate.
  • As your mortgage payments are fixed you ARE ABLE to budget easily during the period of your contract.

 

Example:

 To give you an idea of what a Fixed Rate product looks like, here is a graph with the Bank of England Base Rate, a Standard Variable rate and an example Fixed Rate product.

CERTAIN TYPES OF MORTGAGES ARE ONLY AVAILABLE WITH FIXED RATE PRODUCTS.

If you wish to more about fixed rates book your free consultation now.