Has The Time Come To Fix My UK Home Mortgage Loan Rate?
With the somewhat surprising recently announced rise in the UK base rate affecting UK homeowners with floating rate mortgages, and with economists and industry analysts now predicating that UK base rate is likely to reach 5% sooner rather than later, many UK homeowners may be left wondering whether or not the time is not right to jump ship and re-mortgage their home mortgage loan at a fix rate. While you initial assessment of this may at first glance seem sensible, care does need to be taken before going with such drastic action.
The first thing to note with any decision as to whether or not you should be fixing your home mortgage loan rate is that, normally, UK home mortgage lenders do not offer the current base rate as a fixed rate but add a margin to this sum. As such, in order to make any profit out of the deal, not only do you need UK home loan interest rates to go up, but you need to make sure that they’re likely going to go higher than the current fixed home mortgage loan rate.
Currently, according to the latest figures from the Council of Mortgage Lenders, average fixed interest rates for home mortgage loans, being offered by UK home loan mortgage providers, have risen 0.5% to 5.11%. As such, at this time, both variable and discount home mortgage interest rates are approximately 0.5% cheaper than fixed rate interest rates. Consequently, current fixed rate home loan mortgage rates are not price competitive when comparable with discount and variable rates.
- Why Does The Interest Rate Of Your Mortgage Change?
The biggest difference between a mortgage and other types of loan is the fact that the interest rate changes throughout the term of the loan. Why is this? And which type of interest-rate arrangement is best?
Nonetheless, things don’t need to stay that way. Expected rises in interests rates could result in both variable and discount home mortgage loan rates being higher than the current fixed home mortgage rates being offered. Thus, the question is whether or not you want to bite the bullet now and pay over the top in interest for your home mortgage rate in the hope that you’ll then be fixed in when the variable rate passes by?
Given that fixed rate home mortgage rates do not last forever, but as for a relatively short time, given the life of a home mortgage, and given that you will need to pay additional costs and fees with any re-mortgage of your UK home mortgage loan, such as surveyor’s fees and possible breakage costs for early repayment of your existing mortgage loan, making sure you get the calculator out and the timing right on this call is crucial. What is certain is that you do not need to make this decision right now.
26th September 2006
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