Fixed-rate mortgages

If you are on a strict budget, it might be a good idea to fix your mortgage rate from the day you take out your mortgage. You can also remortgage onto a new fixed-rate deal when each fixed period ends, to ensure you always know what your repayments will be.

If the Bank of England base rate looks set to rise, this could be a good time to switch to a fixed rate mortgage deal, as all other mortgage rates are variable, so are likely to be affected by this, either directly or indirectly. 

Another good time to switch mortgages onto a fixed-rate is when competition between lenders has driven the rates down. Bear in mind that you can look to remortgage up to six months before the end of your current deal, so if rates are low but are expected to rise over the next six months, you can lock in a deal ahead of time. 

The good news is, you’re not even bound to a remortgage deal until the completion date (when your existing deal ends), so if you find a better deal in the meantime, you can still take advantage of it.

There is an element of guess work and an element of personal preference here. It can be difficult to estimate what interest rates will be like when your fixed-rate deal ends, but this is easier to gauge with shorter fixes, as there is typically more readily available information about what’s most likely to happen to rates in the next 12 months (albeit this won't be a guarantee). 

The most common term lengths for this type of mortgage are two years fixes and five year fixes, however, an increasing number of people are now fixing for 10 years or more. A short or medium-term fixed rate protects you from interest rate rises but you won't miss out on lower rates for too long, should they fall during your fixed period. 

However, shorter fixes also mean remortgaging more frequently to save yourself from falling onto the lenders standard variable rate (SVR) which is typically higher, and also subject to change. There are a number of costs involved with remortgaging, so if you intend to remortgage every two years, for example, these costs could outweigh the benefits of securing the lower rates.

Another important consideration is whether you are likely to want to move home during the fixed-rate period. Most fixed-rate mortgages charge early repayment fees if you want to leave them early, which you may need to do to move. 

However, many mortgages are portable, which means you can take them to a new property with you. You’ll want a portable fixed-rate mortgage if you do plan to move before your fixed-rate ends.

The current mortgage market is very volatile, so there have been some anomalies outside of expected short and long term fix costs. Traditionally, longer fixed-rate periods have been much more expensive as they offer greater security, however, this has not always been throughout 2022. The price gap between different deal lengths has narrowed across the board, with some just as cheap fixed-rate mortgage deals now available for longer terms. 

It’s absolutely worth speaking to a mortgage broker to help you find the best deal, as they have access to the most up to date rates across the market.