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Fixed Rate Mortgage

As the term implies Fixed Rate Mortgage means that the interest rates on your borrowings remain fixed. The rates are not subject to any change irrespective of the market interest rates.

This mortgage type has gained immense popularity in UK. A large variety of mortgage deals are available for different periods. Popular among these are the 2 to 5 year duration mortgages. However Fixed Rate Mortgages are available for varying periods ranging from 6 months to 25 years.

Logically the locked fixed interest rate should be higher for longer periods as you are covering your self against risk of increasing market interest rates. However due to escalating market competition 2 to 5 years mortgage deals are available at very similar fixed interest rates.

Fixed Rate Mortgage Advantages
  • Suitable if you want to budget your monthly liabilities in advance and keep them stable. Here you exactly know how much you need to pay every month
  • Compare it to a variable rate mortgage wherein your monthly liabilities might increase or decrease based on changes in the base rate
  • You can choose to go for a Fixed Rate Mortgage for upto 5 years after which the rates revert back to the standard variable rate. Hence if interest rates are falling after your fixed lock in period you will be at an advantage
  • Protection against mounting interest rates
Fixed Rate Mortgage Disadvantages
  • In periods of falling interest rates you end up paying higher interest as you have locked in a fixed rate
  • Mortgage fees have rapidly increased for fixed rate mortgages recently. They can range anything from £300 to £1000