Fixed Rate Mortgages

A fixed rate mortgage is where the mortgage rate remains fixed for a set duration which can normally be 2,3,5 or even 10 years and sometimes other periods in between. In choosing a fixed rate this means that if the Bank of England base rate moves during the period of the fixed rate your rate and therefore your mortgage payments remain the same.

This type of mortgage can be chosen if the current market seems a little unstable where the Country's base rate is fluctuating and/or you are looking for stability in your payments. So the key advantage of a fixed rate mortgage is that it will allow you to budget the exact monthly cost of your mortgage for a pre-determined period of time.

However in order to have a fixed rate mortgage the lender will have already purchased the money in the swap rate money markets and as such will normally wish you the customer to be "tied in" to the mortgage for the duration of the fixed rate. This means that you might choose a fixed rate for 2 year's duration; the lender would attach an Early Repayment Charge to the mortgage if you were to redeem/leave the mortgage before the 2 year period ended. This is not always the case and there are often a few lenders that offer a fixed rate deal with no tie in's but they may have a slightly higher arrangement fee.

After the fixed rate period ends the mortgage rate will normally revert to the lenders standard variable rate (SVR), which will be approximately 2 points above the Bank of England base rate. At Grovelawn Financial we would always contact you the customer 2 - 3 months before the end of the promotional fixed rate period to then see what is best for you and what your current circumstances may demand. The choice will be whether to stay with the same lender and perhaps switch to a further promotional fixed rate or perhaps a tracker rate for another set period or move to an alternative lender that may be offering a free valuation and or free legal services in order to encourage you to move lenders and ultimately offer a more competitive deal to move your mortgage.

It will depend though on other aspects of your existing mortgage as to whether is best to stay with your existing lender or move and this may be determined by the additional charges lenders levy when redeeming your mortgage, all of this would be calculated by your mortgage advisor and fully explained.

Your property may be repossessed if you do not keep up repayments on your mortgage.

For more information on how we are paid for mortgages please click here.

Grovelawn Financial Services, 1C Restormel Industrial Estate, Liddicoat Road, Lostwithial PL22 0HD — T: 01208 872689