A Fixed Rate mortgage is one where for a period of time the interest rate is set and will not be affected by changes in interest rates. At the end of the period the interest rate will become the Variable Rate applicable at that time (see Variable Rate). Usually the rate is fixed for between 2-5 years, though sometimes longer periods are available.
Advantages:
Provides guaranteed mortgage repayments or the duration of the fixed rate period giving protection from rising interest rates.
Variety of periods beginning as short as 6 months, so likely to be one to meet most needs
Disadvantages:
Probably have to pay an upfront application fee and/or an arrangement fee once the loan is taken
If interest rates fall below your fixed rate you may be left paying a higher rate than you need to
If you redeem (pay off) your mortgage during the fixed rate period and often for a period afterwards you may have to pay an early repayment charge. This will vary from lender to lender- speak to one of our advisers to see what this would mean to you.
