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That means you're safe from interest increases - if you had a floating interest mortgages like a trackers program, your money would rise in line with rising interest levels. It also means that you will not profit from interest cuts - your montly payment will remain exactly the same for the duration of the transaction.
As a rule, fixed-rate mortgages last two or five years. There are, however, other fixed-rate loan lenghts, some of which are much longer-term such as 10-year fixed-rate loans. Generally speaking, the longer the duration of the interest period, the higher the interest and charges. But because the lifetime of the products is longer, it is longer before you have to remortgage so a long run solid interest can work out better value over the course of being.
Finding out whether a tight interest will represent a better value for you can be complex, so it is a good idea to talk to a mortgage advisor who can help crack the numbers. You will know exactly how much you will be paying for your mortgages each and every day for several years, which makes it much simpler to budget.
These can be particularly soothing for first-time customers or anyone who believes they would be struggling to afford an increased amount should rate soar. They may be able to find a royalty-free loan with a set interest date, but keep in mind to verify if this actually gives a good value or not. Even though there are usually prepayment penalties for mortgages, many allow you to exceed a certain amount every year without penalties - 10% are usual.
On the other hand, the major drawback of a fixed-rate mortgages is that you will not profit if interest levels drop. Although interest rates cannot drop much further if the Bank of England basic interest is at 0. 5%, many home-owners who pay above the advantages on tight interest rates found themselves when the basic interest rates fell from 4. 5% to 0. 5% between October 2008 and March 2009.
Simultaneously, some happy mortgage borrowers on trackers below the Bank of England's prime interest did indeed land without interest on their mortgages. A further drawback is that traditional interest and fee charged on fixed-rate instruments are higher than their floating equivalent. The Bank of England's numbers showed that in the last three months of 2015 the mean interest level for new fixed-rate loans was 2. 62% - only 0. 25% higher than the mean of floating interest of 2.37%.
However, in the course of 2009, the mean level of interest rates was around 2% higher than the mean level of floating rates, so there was a strong incentive to choose a floating interest product and run the risks that interest rates would have risen much more at that point. When my interest ends, what happens? If your fixed-rate transaction comes to an end, you will switch to your lender's default floating interest rates automaticly.
Though this may well be higher than the static interest that you were on, in this case your monetary repayments will rise. For this reason, it is a good suggestion to think about remortage a few month before the end of your interest period. You can book most mortgages up to six month in advance, so talk to a Mortgage Advisor who will help you compare interest and charges on both mortgages.