Fixed Home Loans

Fixed rate loans have a stated interest rate that does not change over the life of the loan, whereas the rates on adjustable rate loans are linked to an index and change as the index rate changes. The main advantage of a fixed-rate loan is that the borrower is protected from sudden and potentially significant increases in monthly mortgage payments if interest rates rise.

These type of loans won't suit all borrowers but are particularly popular with first time buyers looking to ensure they keep their mortgage payments steady for a set period. Fixed rate loans also offer the option to refinance if interest rates decrease and may be the right loan if you are planning to be in your house for many years.

Interest rates on fixed-rate loans are usually higher than starting rates on adjustable-rate loans. A fixed rate loan, that can be taken out from a range of UK banks, building societies and financial companies, allows financial planning and a freedom from uncertainty that might not be present with other loans that follow tracker or variable rates.

If choosing a fixed rate loan, you also need to consider the term of the loan, which is usually between one, and five years, and some lenders are now even offering a 10 year fixed rate mortgage.

In order to 'sweeten the deal' even more a lot of top UK lenders are starting to offer additional incentives to take out these mortgages. They include cash back on completion of mortgage and the non-payment of house valuation, which can be as much as £500.

In todays market the fixed rates range from 6.5% - 8% from the top lenders. Depending on the amount which you want to borrow it would be worthwhile spending a lot of time looking at all the fixed rate mortgages on offer as a 1.5% difference in interest rate payments can be substantial, especially if you are a first time buyer who is trying to save as much money as possible.

And of course once the Fixed Rate period is finished you will have to return to a normal mortgage with variable rates. You should also consider this when looking at a potential lender as if they historically have higher variable rates of interest compared to other lenders then you could end up paying more for your mortgage loan eventually.

Conclusion

The threat of higher interest rises has pushed more borrowers towards fixed rate loans. If you take the time to browse some of the loan options that are available and have a look at both the fixed rate loans and the variable rate loans you will be able to get a clearer idea of which loan suits you best.

Paul Hockney is an online loan expert who provides Online Homeowner Loan tips and advice.

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