What is a fixed rate mortgage?
A fixed rate mortgage is simply a mortgage where the interest rate is fixed at a set rate for an introductory period (often 2 years). This means you know exactly how much your monthly payments will be during the introductory period making financial planning easier.
After the introductory period, you will normally be moved to a standard variable rate of interest which may be significantly higher than the fixed rate.
What are the alternatives to a fixed rate mortgage?
The most common alternative to a fixed rate mortgage is a tracker mortgage. This gives you an interest rate that is set at a fixed percentage above the Bank of England base rate (or equivalent).
This tracker rate is also normally only for an introductory period, but can often give you a lower initial rate than many tracker mortgages.
However, you are taking a risk as the interest rate on a tracker mortgage can go up as well as down, depending on the movement of the base rate being tracked.
Should you remortgage when the fixed rate ends?
When your fixed rate period is coming to an end, it is definitely worth considering remortgaging to avoid a sudden leap in your interest rate.
Many lenders will pay standard remortgaging costs when you switch your mortgage to them, so this can make remortgaging very affordable.
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Remortgaging is particularly popular at the moment as interest rates are low.
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Whether it will be a good idea for you to remortgage depends on a number of factors, including your goals and your personal circumstances.
However, in general, if interest rates are lower than you are currently paying on your mortgage, it may be a good time to remortgage.
If interest rate are higher than you are currently paying, it may be better to look at other options, such as a second mortgage or a personal loan (if you aim is to borrow more).
If you are not sure whether now is the right time to remortgage, it is a good idea to speak to an independent mortgage broker who will be able to offer impartial advice.
