Fixed Rate Mortgages
With a fixed rate mortgage the monthly repayment
amount is fixed for a specified period. The fixed
rate remains constant irrespective of changes to the
Bank of England's base rate or the lender's standard
The fixed rate period typically lasts for two to five
years, although it can be longer. At the end of the
fixed rate period the interest rate reverts to the
lender's standard variable rate. An early redemption
penalty will apply should you wish to cancel your
mortgage before the end of the fixed period.
Furthermore, many fixed rate mortgages 'tie you in'
for longer periods. This is because an early
redemption penalty is charged if you cancel your
mortgage within a set number of years following the
end of the fixed rate period.
- It is easier to budget for your mortgage
repayments as you will know exactly how much you
will be paying over the fixed rate period.
- You can usually benefit from a lower interest
rate in the first few years, freeing up money for
furnishings, carpets or whatever else you
- You are protected from any increases in the
Bank of England's base rate.
- Early redemption penalties will almost
certainly apply, which may also extend beyond the
end of the fixed rate period. This means you will
be unable to change your mortgage during the 'early
redemption penalty period' without paying a fee,
which may be up to the value of six months mortgage
- During the fixed rate period you may miss out on
a more competitive interest rate if the lender's
standard variable rate drops to less than the fixed
- You may be trapped in an uncompetetive rate once
the interest rate reverts to the lender's standard
- You will normally have to pay an application
fee when arranging your fixed rate mortgage.