“Should I fix my mortgage now or wait and see?” “Am I better off on a variable rate?” If these are the questions on your mind then we are here to help you make some sense of it all.
It’s fair to say that after the Chancellor’s mini budget back in October of 2022, the mortgage market went a little bit crazy. Fixed rate mortgages suddenly become the most expensive product on the market with two and five year deals from some lenders working out more expensive than their standard variable rates.
Prior to this, many were already scrambling to the get the best fixed rate deals available as their fixed terms came to an end and the Bank of England started to raise the base rate.
Fixed rates are coming down
Now, we are starting to see fixed rate deals coming down, and the mortgage market levelling out somewhat, despite the continual rate increases by the Bank of England. More lenders are offering better fixed rate terms with some coming in under 4%. While lenders are guided by the BOE rates, they do also consider other dominating factors within the market place.
So are you better off on a fixed term or a standard variable rate? Let’s take a look at an example, valid at time of publishing:
Example (correct at time of publishing)
In this example the property was valued at £250,000 with an outstanding mortgage of £200,000 (80% loan to value with a 25 year term).
A rate fixed until 31/08/2028 at 4.11% requires monthly payments of £1072.18.
The same lender’s SVR is currently 6.34% meaning a monthly payment of £1287.69. As you can see, in this instance it pays to take the fixed rate option. As the BOE base rate increases, this is not necessarily being reflected in the fixed rates available from lenders.
Of course, this is just an example and the rates will vary from lender to lender. That is why it is so important to get advice from a professional that is tailored to your individual requirements and circumstances.
Fixed rate benefits
- Peace of mind – you know that what the cost of your mortgage is going to be for the term you have fixed for whether that be 2,5 or 10 years.
- If the rates go up again, you are protected from any nasty surprises for the term that your mortgage rate is fixed for.
- A long term fixed rate mortgage means you avoid any costs associated with re-mortgaging every couple of years
Variable rate benefits
- If the rates go down, you are going to benefit from a reduction in monthly payments.
- They can have lower arrangement fees than fixed rate mortgages
- Less fees to overpay your mortgage
Consider reducing your mortgage costs
Of course, you don’t have to simply leave it to chance and fix the amount you pay each month. You could opt to over pay your mortgage each month or in lump sums. This means that future payments could go down or you could pay off your mortgage quicker. You do need to check the terms of your mortgage and how much you can overpay each year without penalty.
If you are struggling with mortgage payments, you could consider interest only until such a time as your circumstances improve. This means you will still owe the same and the balance of your mortgage won’t reduce in the meantime.
There is much to consider – your own personal circumstances, your future plans and what happens with the market. If you would like to discuss your concerns or options and answer the question “should I fix my mortgage now?”, then seek professional advice from an independent mortgage advisor. You can contact one of our friendly and knowledgeable team on 01934 756717.