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Fixed rate mortgages vs. variable rate mortgages

Fixed rate mortgages vs. variable rate mortgages

Category: Mortgages

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Since alternatives to traditional mortgage products were introduced to the market, the decision to fix your rate or opt for a variable deal has loomed large for borrowers.

Since the Bank of England's base rate of interest was cut to the historical low of 0.5% last March, homeowners on variable rate mortgages have been the big winners, with interest repayments dwindling – sometimes to almost nothing.

Many have used the holiday to overpay their mortgage, effectively shaving years off their payment plan. Others have decided to pay down other debts such as loans or credit cards.

However, those with trackers may soon find their time in the sun comes to an end.

Rising inflation has increased the possibility of interest rates. There have been predictions of the measure ending the year at 1.5% or more, while the Organisation for Economic Co-operation and Development has called for rates to rise to 3.5% before the end of 2012.

Brave borrowers might want to take a gamble on rates staying low, but many may want to tie into a preferable fixed rate now, before the possibility of rates rising sharply.

Whatever your mortgage poison – fixed or variable – has some deals you may want to run the rule over.

Fixed – rate stays the same regardless of interest rates

Two year fixed rate mortgage from Co-operative Bank, 2.95% (reverting to 4.24%)
Two year fixed rate mortgage from HSBC, 2.99% (reverting to 3.94%)
Two year fixed rate mortgage from Yorkshire BS, 3.05% (reverting to 4.99%)

Variable – any rise in interest rates are added to mortgage rate

first direct. 2.30% for term
ING Direct, 2.84%for term

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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 Any products featured may be withdrawn by their provider or changed at any time.