UK Mortgages - Should You Fix Or Not?
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Over 250,000 UK mortgage borrowers will witness their two-year fixed rate loans end before the end of 2007. Fixed rates were alot cheaper just two years ago, with the average two-year fixed rate at approx 4.5%. Current fixed rate mortgage loan deals could lead to an increase in repayments of around £230 per month for a homeowner borrowing £120,000 through their mortgage loan.
The Bank of England has raised interest rates five times since August last year and this can be blamed for the rise in UK mortgage prices. However, the Bank of England has managed to maintain the interest rate steady at 5.75%, plus the confusion in the UK markets, many mortgage experts are saying that interest rates have peaked and will no longer rise. If these people are correct, then most mortgage borrowers should find that having a variable rate mortgage instead of a fixed mortgage deal, means they should see a fall in their monthly mortgage payments.
Variable rate mortgages work in two main ways. They are either tracker mortgages (linked to the Bank of England's base rate) or they can be discounted mortgages (offering a discount on the lender's standard variable rate (SVR)).
Tracker mortgages are linked to the base rate, therefore, mortgage repayments can go down as well as go up. The rates on these morgages are often at around the base rate (right now aound 5.75%) but they usually come with high fees or charges. Discounted mortgages are linked to the lender's SVR, therefore, it is the lenders choice when they choose to reprice their discounted deals, although they generally move with the base rate changes. Discounted deals are, however, usually cheaper than tracker mortgages
If you have major worries about cost and affordability or you want to know that your mortgage payments are the same each month, then a fixed rate mortgage is better for you. Please be aware though that fixed rate mortgage deals have become alot more expensive over the last year, therefore, you could find yourself paying well over the other loan options.
If you are heading towards the end of your current mortgage deal it is important to calculate how much you can afford each month and whether you feel comfortable with an element of risk. Most mortgage advisers suggest that you apply for a mortgage two months before your current deal finishes. Use our helpful links below to compare mortgages:
UK Fixed Rate Mortgage Best Buys
UK Discounted Mortgage Best Buys
UK Tracker Mortgage Best Buys
UK Mortgage Calculator
UK Mortgage Loan Comparison Calculator
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