In an unstable housing market, homebuyers are faced with the tricky choice between fixed and variable mortgages.
Today’s mortgage rates could be gone tomorrow!
Some experts say that 5 million UK families will see their mortgages spike by more than £5,000 by the end of 2024. Others have a rosier vision of the future, claiming that rates could fall rapidly in 2023. (Let’s hope they’re right!)
In such a slippery housing market, it’s difficult to decide what kind of mortgage would work best for you.
That’s where our mortgage advisors come to the rescue!
Fill out one of our short forms, so that we can help you get the best possible deal on your mortgage – click here, it only takes a minute!
Fixed versus variable: what’s the difference?
There are two types of mortgage.
With a fixed rate mortgage, the interest rate is locked down for a set amount of time, usually around 2 to 5 years. This means that you don’t have to worry about your monthly payment changing during those years!
However, when that time runs out, you’re automatically switched to the variable rate.
If you want to learn more about fixed-term mortgages click here!
With a variable mortgage, the interest rate can change at any time within the term of the mortgage.
This means that if interest rates go up, your monthly payments go up; if they go down, your payments go down. A variable mortgage can be a bit of a bumpy ride!
But what does this mean for me?
Variable and fixed-rate mortgages each have their pros and cons.
Should I get a fixed rate mortgage?
With a fixed-rate mortgage, you can rest assured that your payments will be the same every month, no matter what happens to interest rates!
This makes fixed-rate mortgages a good option in a volatile economy – they provide some stability in unstable times.
However, if interest rates suddenly drop, you might find yourself holding the bag and paying a far higher monthly bill than you would if you had gone for a variable mortgage.
Should I get a variable mortgage?
Variable mortgages are risky: they have all the advantages and disadvantages of flexibility. If interest rates stay low, your monthly payments stay low. It’s as simple as that!
And, because you’re taking a risk on interest rates increasing in the future, your lender may give you a favourable rate when you first start out!
However, the danger of a variable mortgage lurks in increasing interest rates. A dramatic rise in rates will mean that your monthly payments may become hard to handle!
So what should I do?
Honestly, there is no clear-cut answer as to whether a variable or fixed-rate mortgage is better for you. A mortgage is a long term commitment. You will want to put your best foot forward!
The FOMO team has 80 years of combined experience in dealing with mortgages. With 7,000 UK clients and 5 star reviews across the board, you won’t find better help when it comes to making this tricky decision!
Get in touch with our experts so that we can help you tackle the modern housing market.
