First time buyers find budgeting easier with a fixed rate mortgage
The recent interest rate rises enforced by the Bank of England has left a number of households and individuals struggling to keep up with their mortgage repayments.
In particular, first time buyers that bought their homes shortly before the first of the interest rate hikes may have suffered, as many are not used to budgeting and may not have been prepared for the rise in repayments, particularly after having to take out a large loan in order to fund the cost of property purchasing.
With this in mind first time buyers that are still in the process of looking for a mortgage should ask themselves whether a variable rate mortgage is the right choice, or whether they might enjoy increased peace of mind by opting for a fixed rate mortgage. With a fixed rate mortgage your interest rate will remain static for a specified period of time, which means that no matter what happens with the Bank of England interest rates your repayments will not go up, so you can enjoy easy budgeting without the fear of finding yourself unable to keep up with mortgage repayments.
On the downside you will pay a slightly higher interest rate on a fixed rate mortgage than on the existing variable rate mortgage, and if the base interest rate falls rather than rises you will not benefit, as your interest rate will remain fixed. However, some experts have already predicted further interest rate rises in 2007 and for many first time buyers and home movers the stability of a fixed rate mortgage may well be worth the slightly higher initial interest rate.
The two recent interest rate rises, which took place within the space of three months, has shown just how mortgage repayments can fluctuate, leaving some people struggling to meet the increased repayments when the rates rise. The Bank of England put the interest rate up by a quarter of a percent in August 2006 and in November 2006 pushed it up by a further quarter of a percent, taking it to five percent.
28th December 2006
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