Pros & Cons of Fixed Rate Remortgages in Credit Crunch
Of those borrowers that bought their homes 3 or more years ago, 47% chose fixed rate mortgages compared to 76% in 2007 - 2008. Clearly there has been a shift towards the more ‘appealing’ fixed rate deal rather than variable rate mortgages. As our economic climate changes, will this continue to remain the case? Here are a few things to consider… 
Fixed Rate Mortgages
Pros:
- Security! Homeowners know how much they will pay each month making budgeting much easier.
- Secure a rate you are happy to pay for couple years or the duration of the mortgage.
- Changes in the Bank of England’s base rate do not affect your rate.
Cons:
- If the base rate falls, your fixed rate mortgage may cost more than the equivalent variable rate deal.
- There are likely to be arrangement fees and early repayment charges.
- Upon completion of the fixed rate term, you will have to default to the lender’s standard variable rate (SVR) or remortgage.
Variable Rate Mortgages
Pros:
- If the Bank of England base rate falls, your monthly payments will fall as well.
- Early redemption fees are unlikely if you decide to move onto another product.
- Initial rates are usually lower than the fixed rate product on offer so you will pay less in the onset.
- You are unlikely to be charged arrangement fees.
Cons:
- If the base rate goes up, so will your monthly payments.
- Variable rate mortgages are more difficult to budget for.
- After the initial fixed rate period, your rates will probably increase.
Get your FREE mortgage or remortgage quotes with Best Quote Mortgages
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Leave a comment