Advantages and disadvantages of fixed rate mortgages

When it comes to securing your next mortgage, you’ll need to make the decision as to whether to go for a fixed rate or adjustable rate mortgage. By speaking to relatives and friends who have gone for the fixed rate option you may have already heard tales of great long-term benefits – or missing out on potential savings.

So, here is a quick guide to the basic advantages and disadvantages of fixed rate mortgages.

Advantages

The number one advantage, and the reasoning behind fixed rate mortgages, is that you can lock in a set mortgage payment amount each month and sleep easy at night knowing that, regardless of economic fluctuations, that is all you will be paying. If you don’t have a lot of room in your monthly budget for extra outgoings then a fixed rate mortgage is very appealing as you won’t have any surprises and can plan ahead as far as you lock that rate in for.

Furthermore, if interest rates are currently very low and, after securing your payment plan, they increase, then you will benefit from making savings whilst those on variable rate mortgages lose out.

Disadvantages

The obvious flip side of this benefit is that if interest rates then fall, then you are going to miss out on the extra savings you’d have made by going for a variable rate mortgage. This could work very badly in your favour if the Bank of England were to decide to cut them low and hold them there for an extended period of time. If you were to decide you’d like to refinance your home or to switch to a variable rate plan, then you’ll find yourself with no room to manoeuvre.

However, there are other options aside from a fixed rate or variable rate mortgage, such as the ability to go half and half. It all depends on your personal financial circumstances and working out what is best for you.

It is usually better to speak to a mortgage advisor who has the specialist in-depth knowledge into this arena. We offer mortgage advice in Bristol and do so in a professional and impartial manner. If you think you’d like to find out more and speak to someone with the right industry knowledge, then get in contact with us today.