With interest rates plummeting to a historic low, now is a good time to be looking for a new mortgage product in the hope of reducing your monthly outgoings, and hopefully a lot of money over the long term. But if you are wanting to compare mortgage interest rates, what precisely are all of these different types of mortgages available from the lenders?
First, for about a third of mortgage holders, the fixed rate mortgage is the preferred type of mortgage. With this type of mortgage you agree with your selected bank that for a certain length of time you will be charged a fixed . The fixed term duration may be a few months up to several years, it depends on the offers currently on the market. How low the interest rate is will depend on how long you are signing up to it. The lesser the time period, the more reduced the risk there is to the lender that the rates could go back up in that time period, so normally the interest rate offered is typically more favourable. It is this fixed element of the mortgage that many mortgage holders do want. For the agreed period you know precisely how much you will be paying out for your mortgage. There can be no interest rate increase surprises to upset your budget. You are sure that unless you move your mortgage, precisely what you will be paying.
But this is not solely seen as an advantage, it is also a disadvantage. If interest rates do drop further, as has been in the news a lot at the moment, then the rate that you are paying doesn’t benefit. And this is the chance of this type of mortgage. You know precisely what you will be paying, regardless of whether interest rates increase or decrease.
When your fixed rate mortgage has ended, you may then have a tie in period with the bank during which you have to stay with the bank and pay the variable rate product. This is the payback to the bank when they have given you a very good fixed rate mortgage. A variable rate mortgage is the basic mortgage that a lender will offer. It is their basic no frills mortgage and moves with the base rate, although not always matching the base rate exactly.
Usually brokers will advise that all customers on the bank’s variable rate mortgages should look at their mortgage and think about moving to another mortgage, or bank. It is usually not discounted in any way and is at risk of increasing with every rate change. Quite often this type of mortgage is seen as the lender’s way of making money. They are typically no frills, no savings and a sign that you should be reviewing your mortgage. If this is what you have currently got, then it is well high time that you decided to compare today’s mortgage rates and find yourself a brand new mortgage.
Access timely points of view about auto loan calculator – welcome to your individual tips store.
RSS FEED
