What Are Fixed Rate Mortgages?

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What Are Capped Rate Mortgages?: A capped rate mortgage puts a limit on maximum interest payable on your mortgage over a predetermined period. If the mortgage rate is BELOW the cap the borrow will enjoy the lower interest rate available.

Fixed rate mortgages set the interest rate on the loan at a level agreed at the outset of the loan. Fixed rate mortgages only have a fixed rate for a set period of years after this time period the interest rate will revert to your lenders standard variable rate.

Fixed rate mortgages can be very advantageous if you are trying to manage your expenditure. You will be fully aware of how much you have to pay each month, and you will be insulated from any rises in the base rate and cannot be caught out with sudden increases in payments. If the interest rate rises above the fixed rate on your mortgage, you will actually be saving money.

However, if the interest rate falls during your fixed rate period, the real cost of your mortgage will actually increase. However, you will still know how much money will be coming out of your account each month, this allows you to more effectively plan your personal finances.

The fixed rate period is typically between six months and five years, traditionally fixed rate periods of between 1 and 3 years have performed best. You may even be able to get a fixed rate for the hole life of the mortgage. NOTE this can be very dangerous, always ensure that interest rates are likely to rise before taking out an fixed rate mortgage.

When considering what period of fixed interest rate would be best for you refer to a qualified mortgage broker. You should also take advantage of the internet and the print media to read up about the Bank of England interest rates so that you can follow your brokers reasoning regarding what is the best fixed rate mortgage for you.

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