Fixed Rate Mortgages
What are the benefits of a fixed rate mortgage? Which lenders are offering which products and how do they compare?
Fixed in stone
Remember that just because some of your friends have got a good deal from one lender doesn’t mean you will get offered the same rates. Each application is judged on its own merits by the lender. They will assess your credit and employment history, the amount of equity in your existing property and other such criteria.
Fixed means frugal
Knowing exactly how much your mortgage payment will be every month can be a huge benefit to some people. For example, if you are just starting out on the property ladder and you are considering buying a first home then the chances are you will not have a great deal of disposable income.
If you are moving in with a partner, even if you are not thinking about it now, pretty soon you might start to hear the patter of tiny feet. If those feet belong to a child then you will continue to have little disposable income. If they belong to a dog or other family pet, then enjoy you spare cash!
A fixed interest mortgage will enable you to plan your finances.
Compare and Contrast
There are a number of sites on the internet that will give you varying degrees of detail in their mortgage comparisons. It is always worth either speaking to an Independent Financial Advisor or doing some comprehensive research on the products available before jumping straight into a bank or building society who can only offer you advice on their products.
At the time of writing, the Yorkshire Building Society was offering fixed rates between 5.6% apr and 6.3% apr. The starting interest rates for the fixed period were starting at 4.38%, but it is the apr figure that will give you a like for like comparison between products. Always ask for this figure as well as the other features of the mortgage you are considering.
The Leeds Building Society is currently offering between 6.6% apr on its fixed rate mortgages, while The Coventry Building Society is offering 5.5% apr. The Skipton Building Society recently launched it range of fixed rate mortgages
over two, three, and five years with rates starting as low as 4.29%.
Bound to pay
Most fixed rate deals will tie you into that lender for the fixed rate period. This shouldn’t actually cause a problem for the type of person that favours the security of knowing their monthly payments, as it is likely they will want to stay with that lender for the period.
Many tie-in incentives are basically penalty payments on the interest if you want to change the mortgage. Some companies extend that tie-in period beyond the fixed rate period and it is worth being aware of this before you decide on your mortgage, as you may well want to change once the fixed rate has expired. Again, the penalty is likely to amount to the equivalent of several months’ interest.
How much is too little?
The other aspect of a mortgage that will be very important in influencing your choice is how much of the total property value will the lender provide you with? 96% is still quiet common but you might find yourself looking longingly at a low apr on a product only to find the lender won’t provide you with enough funds in their offer.
Mortgage Protection
As with all mortgages you will have to put in place some form of repayment protection such as life assurance to make sure the loan is protected in case of accident or death.
In the same way as it will be expensive to take out buildings insurance with the same lender, taking out a life assurance plan to protect their mortgage will also be expensive. For a little extra work and big savings hunt round for yourself. After all you’ve found the best deal for the mortgage, why not excel yourself on these other issues too.
3/4/06
