Fixed Rate Mortgage

A fixed rate mortgage is a mortgage where the interest rate is fixed and therefore the borrower will have the security and knowledge as to exactly how much interest they are paying each month. No matter what happens to the Bank of England rate the interest payments will always be constant. However, the rate set by the lender is likely to be higher than the Bank of England interest rate.

The fixed rate will be set for a given period of time and there maybe an arrangement fee if the product is taken up. The period which the interest is fixed maybe anything from 1 year to 10 years, or more. There may also be a redemption fee if the mortgage is paid off before the end of the fixed term, so care needs to be taken in choosing the right product for the borrower’s future.

Also when the fixed rate mortgage deal comes to an end the new variable rate may be calculated from either the Bank of England rate or the lenders base rate. During 2009 that difference may be substantial.