Fixed Rate Mortgage

The Deal:

Your lender agrees to a set rate of interest for a specified period of time. Irrespective of movements in the interest rate your monthly payments will not change. Generally, anything between 1 and 25-year fixed rates is available. Commonly a lender will require a non-refundable upfront booking fee to be paid on the application to reserve the mortgage. Further fees such as arrangement fees are also frequently experienced with this type of rate.

Advantages:

• Knowing the exact monthly cost of your loan for a set period
• The rate will also provide a buffer against increases in the interest rates

Disadvantages:

• Unexpected increases in payments at term end
• Possibility of losing out should interest rates fall below your agreed rate
• Possibly tied into variable rate with the same lender for various periods following the fixed rate term ends
• Redemption penalties can prevent restructuring of your mortgage and associated finances

Suitability:

A fixed-rate mortgage is the most suitable option in a number of circumstances the most common being those identified below:

• Larger borrowings
• Individuals on tight budgets expect wage increases over the first few years of the mortgage
• First-time buyers looking for security during the first few years of setting up home
• Borrowers who anticipate rising interest rates