Fixed rate mortgages
Fixed rate mortgages are ideal for those of us who like to know exactly what our outgoings are each month. Sometimes a fixed rate mortgage can have a slightly higher interest rate than variable mortgages but no matter what happens to The Bank of England base rate you are guaranteed to not pay anymore whilst you are in your fixed rate period. Obviously this can work against you too as you could be faced with a situation where the interest rate falls, meaning that you are paying above the odds on your mortgage repayments.
You have to evaluate what is most important to you. If having the peace of mind that you know exactly what your mortgage repayments will be outweighs the fact that you could, if interest rates fall, be paying more than if you had taken a Tracker or Variable Rate mortgage, then a Fixed Rate could indeed be the best mortgage rate option for you.
Fixed Rates Versus Tracker Rates
2 Year Fixed @ 60% LTV = 4.39% APR V's Tracker @ 60% LTV = 3.79%
3 Year Fixed @ 75% LTV = 4.69% APR V's Tracker @ 75% LTV = 4.09%
There is also a Fixed Rate option available which is up to 90% LTV with an Annual Percentage Rate (APR) of 6.29% and a Fixed Rate term of up to 5yrs.
LTV = Loan To Value, which is the loan amount divided by the value of your property so a loan of £115,000 against a property valued at £155,000 = a LTV of 74%.
From the figures above (which were from the same mortgage provider) you can see that there isn't much difference between tracker and fixed mortgage rates with this provider, however a tracker works by tracking at a set % above The Bank of England Base Rate. To give you a clearer picture, the base rate at this time is 0.5%. A low rate tracker mortgage we have seen is 3.1% APR on a mortgage of up to 60% LTV with a product fee of £799.
As this is a tracker rate it will change as the base rate changes and so if the base rate falls or rises, so will the Interest Rate, APR and Repayments of the tracker.
With a Fixed Rate Mortgage, the base rate changes will have no impact on your interest rate, APR or repayments, but keep in mind that with a Fixed Rate Mortgage there are redemption penalties if you decide to move your mortgage product or company during the fixed rate term (see your Terms and Conditions), although most providers now have the option to move home without penalties being incurred as long as you keep your mortgage with them.