What are fixed-rate mortgages?
Fixed-rate mortgages guarantee mortgage interest payments stay the same for a set period of time. This initial period can be anything from one year to ten years.
The advantages of fixed-rate mortgages
By far, the most popular choice of mortgage in the UK, the main benefit of a fixed-rate mortgages is it gives the homebuyer the satisfaction of knowing how much their mortgage payments will be over a set period of time. Regardless of whether the Bank of England base rate goes up or down, you always know what you're expected to pay regarding mortgage interests payments each month. This set period for a fixed-rate mortgage can be anything from one year to ten years. At the end of this time period, the interest rate reverts to either the lenders standard variable rate which is usually higher.
The disadvantages of fixed-rate mortgages
As well as protecting you against higher interest rates, the introduction of lower interest rates means you could be paying more than, for example, a variable-rate mortgage. A fixed-rate mortgage can also, often, mean you pay a premium for the security it gives as opposed to the often lower rates that come with variable rate mortgages. In addition, there is usually an 'early repayment charge' that comes with fixed-rate mortgages.
As with any mortgage type, it's important to take into consideration the different aspects involved with a fixed-rate mortgage. For instance, look at how much deposit you need to put down in order to access the different fixed-rate products available. Often, the cheapest rates are only available to those who can put down a 40% or more deposit. It's also advisable to take into account, not just the headline interest rate but any additional fees and charges that come with that lower than usual interest rate.