Let’s first have a think about the bad points to a fixed rate mortgage before we get to the good points. There’s always bad points, we know that.
There’s usually always a redemption penalty if you have to redeem (cancel the mortgage) early. You may move home or simply remortgage. Doing so would cost you.
Set up charges, nasty things they are but they are stuck on to almost all deals. Why we have to pay them I don’t know and I’m sure they won’t go away.
At the end of your deal you could see a big jump in payments as you go from fixed to a normal variable rate. If rates have risen then so will your new payments.
There is of course the chance you could have a bit of a drop as well, which wouldn’t be so bad.
If interest rates go down during your deal you could be paying more than people on SVR’s. It’s a bitter pill to swallow but unavoidable.
There’s also the chance of the opposite though. Rates rise and you are sitting pretty with your fixed rate.
All that said lets list what I think are the 5 most beneficial things about a fixed rate mortgage for you.
1) You sleep soundly knowing every month your payment is the same. No fluctuations.
2) Steady payments every month let you know exactly where you stand financially.
3) Budget control. Knowing what you have to shell out leaves those on a tight budget much better control.
4) Do away with the risk that will cause you stress worrying whether next months payments may be increasing
5) These fixed rate mortgages usually come with an all round lower rate than a normal SVR mortgage (single variable rate). This makes them less expensive.
To wrap up I think a fixed rate mortgage is a better option than an SVR one. There’s good and bad in both but you would be sheltered from rate hikes that have occurred in the recent past. There was a 10% hike once, in a very short time.
This could mean double your payments in just a few months. You wouldn’t just be losing sleep here, you could potentially be losing your home as well. Nasty.
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