Fixed Home Loans

Each type of mortgage deal has pros and cons. So you will need to decide which type of mortgage deal is most suited to your situation.

Fixed-rate mortgage deals

Typically, this type of mortgage will be taken out for over a fixed period of time, namely 2, 3 or 5 years. This method of repayment can be likened to taking an insurance policy out on the interest rates going up. So for as long as the agreed term, your repayments will remain at the same level. The fixed-rate mortgage model will also mean that, if interest rates fall rapidly you will still have to pay the set, agreed repayment amount. The balance between fixed variables is dependent on a number of complex interactions such as the current market view of long and short-term interest trends.

The benefit of the fixed mortgage deals is that you know exactly where your money is going and how much money you need to pay out per month. The potential drawback though, will be that your payable outgoings are much higher, to account for a fluctuation in interest rates. And if interest does fall, your payments will not.

Variable rate mortgage deals

These type of mortgage repayments will vary over time, hence the name. Their changes in level depend on the U.K.'s economy. Growth and inflation will mean that interest rates are increased, to discourage spending. In times of recession, as we have seen in recent times, the interest rates are increased, to encourage spending to help boost the economy.

There are three main categories of variable rate mortgage deals:

Firstly, we have trackers and these will follow the UK Bank of England base rate. Your mortgage rate will mirror the bank rate. If the bank level rises, so will your mortgage. The time period for a tracker can vary from a couple of years to one that lasts the whole lifetime of your loan. It is normal practice for a tracker to return to the standard variable rate on its expiry, if it does not last the course of the loan term.

Secondly, we have standard variable rates (SVRs), which are known as the most simple and straightforward method available, but not always available for every customer. These mortgage rates tend to follow the base rate, but not mirror them. Lenders tend to follow the base rate, but may NOT change their own to match the UK Bank of England base rate to ensure they can make profits. This has been known to cause problems, with many examples of large increases on individual's payable outgoings.

The third type of variable mortgage deal, consist of a discount off a tracker or standard variable. This will normally lasts for a short period of time. It is always best to read all the small print on these rates as many are marketed very cleverly but may mean expensive increase of rates in the future. It's very important to know how big the discount is. And from what rate, the discount is taken from.

Good advice to take from this article is when considering whether you require a fixed or variable, consult a company offering mortgage advice services for more detail Information.

If you want the best mortgage advice and service, contact the mortgage specialists - Mortgage Advice Services for the best mortgage advice services

Our quotation will provide you with an indication of the mortgages and rates available to you.

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