When you apply for a mortgage or remortgage you need to choose which of the available interest rate products you would like.
There are broadly 2 types, interest rates which change and interest rates that stay the same.
A fixed interest rate mortgage is a type of mortgage where the interest rate remains fixed for a set period of time and is the most popular option for the majority of people.. This means that your monthly payments will remain the same, regardless of any changes in the market interest rates.
Fixed interest rate mortgages are available in a range of different terms, usually between one and five years. You will need to decide how long you want your fixed rate mortgage to last before you apply. If you need to move before this period of time finishes, then you will need to find out if you can move home with a fixed rate. This is called porting and it’s a way of avoiding exit penalties.
One advantage of a fixed interest rate mortgage is that you know exactly what your monthly payments will be, which can help with budgeting. Additionally, if interest rates do go up during the fixed term, you will still be paying the same amount each month.
However, if interest rates drop during the fixed term, you may end up paying more than you would if you had chosen a variable interest rate mortgage.
It’s important to remember that fixed interest rate mortgages usually come with early repayment charges, so you may have to pay a penalty if you decide to repay your loan before the end of the fixed term.
Our Guide to Fixed Rates explains this topic in more detail.
