Over the last few years we've enjoyed a stable economic environment, with little fluctuation in interest rates. However, the recent increase in inflation to 3.1%, against the Government target of 2%, suggests that we may be moving towards a more volatile economic period.
With many of us already feeling the pinch from three interest rate rises in the last nine months, it's no surprise that with further increases on the horizon, there's been a rush amongst homeowners to fix their mortgage repayments.
During the period when interest rates were stable and mortgage fees at a more affordable level, two-year fixed rate mortgages were extremely competitive and consumers would move from one short-term deal to another. With interest rates forecast to continue to rise, we have evidence from mortgage lenders that their customers are starting to look for longer-term repayment stability with many now opting for five-year fixed mortgage rate deals or longer.
There is a vast array of mortgage products available, but deciding what's right for you depends upon your own financial circumstances and attitude to risk e.g.
On the other hand, if your mortgage repayments don't make up a large proportion of your monthly outgoings and you have a comfortable level of disposable income available each month, you may be prepared to sit it out and see what happens with interest rates during the next few months before deciding whether to take the plunge.
You will also find that a two year discounted variable rate mortgage is currently cheaper than the fixed rate equivalent, thus saving you money. For example, the Newcastle BS are top of the Moneyfacts Best Buy chart for discounted variable rate mortgages with a rate of 4.65% for two years, which compares to a rate of 5.07% for their two-year fixed rate mortgage best buy.
The message here is that there's no single mortgage that's right for everyone. Everyone has their own financial circumstances and your choice of mortgage will depend on factors such as the equity in your property, the amount you want to borrow, and for how long you want to borrow the money.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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