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Fixed rate mortgages
There is good news for people looking to borrow money in an increasingly uncertain economic climate, as fixed rate mortgages seem to change fast and mostly for the better, giving them more choice of rate, term and lender than ever before. Although, application fees are high as ever, a fixed rate mortgage might be for you plus our independent analysis of the latest trends in the fixed rate mortgage market.
It is understood that the rate you will pay for your mortgage will stay the same for the pre-agreed term, normally two/ five or ten years, whatever happens to interest rates and the economy. It also fixes good choices for first-time buyers or anyone else struggling to climb up the housing ladder.
The problem with fixed rate mortgages is, it can feel bad if interest rates fall, but if you would have struggled to meet your repayments if rates had risen, then it is still worth having, even if you feel bad for a while when rates fell.
It is rather difficult to choose between thousands of fixed rate deals which every bank, building society and other lender will offer. The longer term fixes can give you more confidence about affording them. The rates will vary according to the terms. Some lenders also offer special lower priced fixes for first-time buyers. The best-buy tables in the money sections of newspapers and independent price comparison sites would help you to get a better deal. Low or no-fee brokers can also be worth using.
Today, there is more flexibility with fixed rate mortgages, ie., six months interest penalties tend to still apply and you need to be certain that a fix rate mortgage is right for you before signing up. Most lenders now let you repay up to 10% of your loan each year without any penalties. So if you have any spare cash you are free to cut your monthly payments by cutting the size of your loan.
The bad news on fixed rate mortgages is the higher fees charged by the lenders. Due to plenty of competition, lenders have increased arrangement fees, percentage based fees and have introduced fees on products which had previously been fee-free.
Fixed rate mortgages that are more attractive, which come in at around half the price of almost every other deal in the market may end up paying over the odds for your loan. These bargain basement fixes carry what the industry calls ‘extended tie-ins’, this means that you are locked to your lender long after the low rate fix has ended. ie., during this extended tie-in period, you will be paying your lender’s variable interest rate. Therefore, it is advisable to take out a fixed rate mortgage with no extended tie-ins and to specifically ask about this before you sign up.
According to lenders’ group, activity in housing market
remains at a very low level although there has been a
slight increase in the number of mortgages sold in UK
in the month of February. |
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