One of the most frequently asked questions I get is, “Should I fix my mortgage rate when I remortgage?”
Understanding Fixed vs. Variable Rates
Firstly, let me explain the differences between these 2 types of mortgage product.
Fixed Rate Mortgages: A fixed-rate mortgage means your interest rate and monthly payments stay the same for a set period, usually between two to five years, but could be longer, such as 7 or even 10 years.
For peace of mind and budgeting, this tends to be more preferable for those who'd rather have consistency. You're also safeguarded against any rising interest rates during your fixed rate period.
It's important to be mindful that if rates drop, your payments do not, and if you were in a position to pay off your mortgage in full early, there are often penalties to pay.
Variable Rate Mortgages: Variable rates can change over time and include options like tracker mortgages (which follow the Bank of England's base rate), discounted rate mortgages (these offer a discount off the lender’s standard variable rate for a certain period) and standard variable rate mortgages (set by the lender and can change anytime)
Variable rates tend to suit those who are comfortable with the risk of fluctuating payments.
If you do plan to move or repay your mortgage early, variable rate products tend to come with fewer repayment charges. If you're happy with this element of flexibility and risk, then a variable rate could be for you.
The majority of my clients prefer for fixed rates. This is largely down to personal circumstances, looking for peace of mind, and the need for budgeting and knowing what their monthly payments are going to be.
Monitor Market Conditions
As we have seen in recent years, the economic landscape can be turbulent.
There have been rising interest rates, and increased fear amongst homeowners.
But now that the market seems stable, and experts are predicting lower rates, this can pose questions about what's cheaper, what's potentially more suitable for your current financial situation, and how it will align with your future financial goals.
This is where speaking to a mortgage adviser is recommended, to ensure you're approaching your own mortgage strategy with intent, and with optimum financial wellbeing.
Remember, everyone's situation is different. Some are driven by what's the most affordable to them at this present moment. Others have different objectives, such as not wanting to be tied in, or knowing they could absorb any short term increases whilst holding out for rates to drop.
Making Your Decision
If you're still unsure, let's have a chat. I'm here to help you navigate the mortgage industry, and to ensure you make the most suitable decision for you, your family, and your future.
Remortgaging doesn't need to give you a headache, because we can secure a new deal 6 months before your current mortgage product's end date. And if there is a better product available in that time frame, we can change to to a new product!
Get in touch with us today here or book directly onto my calendar here.
Willow Tree Financial Services are a Financial Adviser based in Polegate, East Sussex, UK. We specialise in Financial Planning, Mortgages, Investments & Pension Planning, Protection & Insurance Wills, Trusts & Estate Planning.
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