Fixed Rate Mortgage - Mortgage with a set interest rate
A fixed rate mortgage is a mortgage product which has a set interest for a pre-determined term. With this UK mortgage the interest rate is set for the entire period of the mortgage loan, the advantage of this is that it enables the customer to know the exact amount they will be paying for the UK mortgage loan during its entire duration. The disadvantage of the fixed rate mortgage is that if UK interest rates fall the customer will still be paying repayments at the pre-agreed rate. Their could be many reasons for taking on a UK fixed rate mortgage, one possible reason is for budgeting. If a customer has strict financial constraints upon them, knowing precisely the mortgage premium amount required will allow them to budget accurately and accordingly.
Mortgage Repayments and Interest Rate Fluctuations.
How the base rate and interest rate fluctuations effects types of mortgage repayments depends on what sort of individual mortgage product customers have.
With a capped rate mortgage it might affect repayments, a rise or fall will be dependant on the direction of change in the base rate and if the mortgage lender passes the change on to the customer.
With a capital and interest mortgage the customer pays of both the interest on the mortgage loan as well as the capital, so repayments will be affected.
With a discounted rate mortgage the interest rate fluctuations does effect repayments, however for a limited time the consumer will have a reduction on the rate according to their agreement. When this agreement expires the consumer can shop around for a new mortgage or negotiate a new deal.
With a endowment mortgages repayments to the mortgage lender covers both the interest the lender charges on the money borrowed and a part is invested to repay the capital. Repayments on the mortgage are affected by any fluctuations in the interest rate.
With a fixed rate mortgage the interest rate is set for the entire duration of the mortgage loan. Fluctuations are not going to affect mortgage repayments during this period.
With a flexible rate mortgage it might affect repayments, a rise or fall will be dependant on the direction of change in the base rate and if the mortgage lender passes the change on to the customer.
With a interest only mortgage the consumer only pays of the interest on the mortgage loan, so repayments will be affected by any fluctuations in the interest rate.
With a repayment mortgage both the capital and the interest is paid back over the agreed term so repayments will be affected by any rate changes.
With a tracker rate mortgage the interest rate changes in accordance with any fluctuations so it will affect repayments and a rise or fall will be dependant on the direction of change.
With a variable rate mortgage it might affect repayments, a rise or fall will be dependant on the direction of change in the base rate and if the mortgage lender passes the change on to the customer.
Fixed Rate Mortgage Information
With mortgage repayments amounts being connected to the base rate of interest the repayments can both go up as well as down, depending on the type of mortgage customers have. With the fixed rate mortgage, customers are except from this uncertainty during their mortgage loans term, which is a distinct advantage if interest rates are believed to be on the rise.