Fixed rate mortgages are popular
In the current climate, it is easy to see why fixed rate mortgages are popular. When the Bank of England increased interest rates at the beginning of November 2017, people who held a fixed rate mortgage were unaffected at the time. This is the key benefit of this style of mortgage, you are confident about what you have to pay, regardless of what happens with interest rates. It is believed that between 50% and 75% of all new mortgages agreed in the United Kingdom are fixed rate mortgages, so there is a strong chance that this is the mortgage for you.
The popularity of fixed rate mortgages can also be seen in figures which show the rate of households affected by the interest rate increase. When the last notable increase occurred, over a decade ago, 19% of households were affected but in 2017, only 11% of households were affected. The volume of property ownership is smaller but there is also the fact that more properties have a fixed mortgage in place, so this is definitely the mortgage of choice in the UK these days.
There is a range of variable rate mortgages to choose from
When it comes to variable rate mortgages, there are a number of options to choose from, but they all work along similar lines. The movement in the Bank of England interest rate will impact on you and of course, the lender has their own variable rate mortgage which is likely to be tied to the Bank of England but with the flexibility to rise or fall further. There are often commercial reasons behind the movement of these mortgages from lenders, so it is worth checking out what is currently on offer as you may have an incentive to choose one over another.
Types of variable rate mortgages to look out for include:
- Tracker rate mortgage which rise or fall with the Bank of England base rate
- Discounted rate mortgage, which offers a discount on a lender’s standard variable rate mortgage
- Offset mortgage which links your mortgage to any savings you have, reducing the interest you pay
Whether one of these options is right for you will depend on your circumstances but they should all be more attractive than a standard variable rate mortgage. This style of mortgage is likely to be the most unappealing option and should only be considered as a last resort.
If you need assistance in finding the right mortgage for your needs, come and speak to Austin Property Services and we will be more than happy to offer advice.