Let's first have a think about the bad points to a fixed rate mortgage before we get to the good points. There's always bad points, we know that.
Redemption penalties are almost always slapped on if you happen to need to redeem the mortgage early. You may need an extra bedroom for a new born? Moving home here would cost you.
Set up charges, nasty things they are but they are stuck on to almost all deals. Why we have to pay them I don't know and I'm sure they won't go away.
When your deal ends you may be facing a sharp rise in payments if the current rate is higher than what you were fixed on. You are now on a single variable rate, which could be high.
You might be lucky and end your deal when the current rate is lower. Your payments would be lower too. Not bad.
If the rates drop during your deal you are stuck paying more than people on an SVR. Difficult situation but you have to take it on the chin.
You could get lucky and the opposite happens. Rates rise. This is a nice position to be in.
All that said lets list what I think are the 5 most beneficial things about a fixed rate mortgage for you.
1) You sleep soundly knowing every month your payment is the same. No fluctuations.
2) The same monthly payment gives you the confidence of knowing exactly where you stand financially.
3) Budget control. Knowing what you have to shell out leaves those on a tight budget much better control.
4) Do away with the risk that will cause you stress worrying whether next months payments may be increasing
5) The actual interest rates are often slightly lower with fixed rate mortgages than normal SVR's. Making them cheaper.
In conclusion I reckon a fixed rate mortgage outweighs a normal SVR mortgage. I suppose there's a good argument for both but consider in the very recent past the mortgage rate has shot up by over 10% in a very short time.
You would be paying way more than you were just months ago. Now this would make you lose some sleep, and maybe even your home as well. Not a nice thought.
Redemption penalties are almost always slapped on if you happen to need to redeem the mortgage early. You may need an extra bedroom for a new born? Moving home here would cost you.
Set up charges, nasty things they are but they are stuck on to almost all deals. Why we have to pay them I don't know and I'm sure they won't go away.
When your deal ends you may be facing a sharp rise in payments if the current rate is higher than what you were fixed on. You are now on a single variable rate, which could be high.
You might be lucky and end your deal when the current rate is lower. Your payments would be lower too. Not bad.
If the rates drop during your deal you are stuck paying more than people on an SVR. Difficult situation but you have to take it on the chin.
You could get lucky and the opposite happens. Rates rise. This is a nice position to be in.
All that said lets list what I think are the 5 most beneficial things about a fixed rate mortgage for you.
1) You sleep soundly knowing every month your payment is the same. No fluctuations.
2) The same monthly payment gives you the confidence of knowing exactly where you stand financially.
3) Budget control. Knowing what you have to shell out leaves those on a tight budget much better control.
4) Do away with the risk that will cause you stress worrying whether next months payments may be increasing
5) The actual interest rates are often slightly lower with fixed rate mortgages than normal SVR's. Making them cheaper.
In conclusion I reckon a fixed rate mortgage outweighs a normal SVR mortgage. I suppose there's a good argument for both but consider in the very recent past the mortgage rate has shot up by over 10% in a very short time.
You would be paying way more than you were just months ago. Now this would make you lose some sleep, and maybe even your home as well. Not a nice thought.
About the Author:
Monty Burn was chief of the Voluntary Mortgage Regulator until his removal for assisting too many people. Find out how to get the best fixed rate mortgage deal or download Monty's Mortgage Bible at his site Mortgage Watchdog. Insider knowledge can be yours.
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