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Mar 01

Should you fix your mortgage?

Reading Time: 3 mins

Should you get a fixed-rate mortgage? Should you trust that interest rates will stay low and opt for a tracker or a variable rate? It’s the big question, and no one really knows. However, you can make an informed choice and decide whether to fix your mortgage here.

No one has a crystal ball, so even economists and mortgage experts can’t tell us whether interest rates will go up this year. Here’s how you can make your own decision.

 

What will interest rates do this year?

Frankly no one really knows – although, at time of writing (March 2020), we’re expecting a rate cut – and that’s good news if you’re thinking about getting a fixed mortgage deal soon.

The problem facing the Bank of England is that our economy is extremely fragile right now. It needs all the help it can get to keep itself going. Low interest rates encourage growth, encourage people to spend and help businesses keep going. However, inflation has crept up and the main weapon against that is higher interest rates.

If the economy continues to be rocky and fragile for many more months then interest rates will stay low. Who knows what is in store for us economically? No one can really guess because there are so many variables such as the uncertainty surrounding Brexit and the coronavirus.

What does fixing your mortgage mean?

A fixed-rate mortgage means you’re guaranteed to pay a set interest rate on your mortgage for the agreed term. This is usually for two, three, or five years – and then you’re transferred to the mortgage lender’s higher variable interest rate. At this point, you can choose to stick with the variable rate, or remortgage. Remortgaging means getting another brand new mortgage, which then pays off your existing one. Doing this means you can choose your fixed term rate every few years to shave years and thousands of pounds of interest over the entire term of your home loan.

A fixed mortgage gives you certainty, too. You know exactly how much you have to pay every month during the fixed period. A variable mortgage could leave you short at the end of some months if rates suddenly climb.

However, fixed mortgage rates aren’t always for everyone. If, for example, you’re thinking of moving again in the next few years, a fixed term won’t be ideal – as it’s very expensive to remortgage to buy another house during your fixed term.

So, should you fix your rate?

Really, it’s up to you. Whether you fix your mortgage rate or not, you are taking a risk either way. If interest rates go down, you’ll be paying a higher rate than you could have on a variable rate mortgage. However, if interest rates go up, you’re paying less than other mortgage types.

The best thing to do is to seek independent mortgage advice. A broker will be able to advise you on the best options for your personal circumstances – including looking at your future income and property plans.

Go to our mortgage comparison service and speak to London & Country about the best deal for you.

the moneymagpie mortgage comparison tool

If you need certainty then you should fix your mortgage and forget what others are saying about interest rates.. Similarly, going for a tracker or variable rate means you could be unhappy if interest rates go up but you will be smiling if they don’t. If you can afford to take the gamble, then do so.

Brexit has undoubtedly affected the country’s economy, with recent contractions the first since 2012. Mark Carney, governor of the Bank of England stated that interest rates could indeed go up or down after Brexit, with the future uncertain.

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