Fixed Rate Mortgages
In times of uncertainty in the UK housing market, fixed rate mortgages offer homeowners with mortgages a good deal. 2004 saw the base interest rate climb up to 4.75%, stinging homeowners carrying mortgages who had not taken out fixed rate mortgages with additional costs on repayment of their mortgages. For the thousands of homeowners carrying variable rate mortgages who've opted for annual financial reviews of their mortgages, the situation is even worse. They'll be hit by the full impact of last year's interest rate rises when their repayments on mortgages are adjusted and fixed in line with the 2004 increases.
Financial analysts are very much divided on their rate forecasts for 2005. Some think that the rate will continue to rise, pushing the cost of mortgages still higher, while others believe the rate will now plateau at a fixed level, keeping fixed rate and variable rate mortgages at an affordable level. With such divided opinions, you can either take a chance with variable rate mortgages or opt for more security by taking out fixed rate loans / mortgages.
Consumer options on fixed rate mortgages
The mortgages market in the UK is extremely competitive. Mortgages providers are constantly fighting hard for mortgages, and so are offering excellent deals on fixed, discounted and variable rate mortgages to win your custom. The lowest fixed rate deals are normally for a fixed rate of one year. Mortgages providers consider a fixed rate over this short timeframe as carrying a low risk in terms of the interest rate climbing out of control. For longer fixed rate terms on mortgages, the fixed rate is adjusted and fixed at a higher level above the base rate, limiting the lender's risk on the fixed deal should the interest rate climb.
At the start of 2005, some fixed rate lenders were offering fixed rate deals for five years at 4.89% fixed. That's only 0.14% above the base rate, and offers exceptional value for money among fixed rate mortgages deals, as you'd be quids-in should the mortgages rate rise by only a quarter of a percent! And to demonstrate just how competitive the UK fixed mortgages market is, one Building Society is offering a 3-year fixed rate product at 4.79% fixed until April 2008! When you consider that the interest rate average over the last seven years is fixed at more than 5.05% then a fixed rate deal like this on mortgages is a stunning offer.