Remortgage Deals: Fixed Rate or Variable?
Remortgaging is a reasonably easy option for house owners.
They have a mortgage on their house, and applying for a remortgage just means attempting to find a better rate on their mortgage than the one they're with at the moment.
For mortgage lenders, however, a remortgage is a huge risk: this means lending a large sum of money.
In the present climate, with the danger of a house price collapse, mortgage lenders are very cautious about how they lend money for mortgages and remortgages, and who can blame them? mortgage lenders want to stay in business, and they must ensure that they don't give a mortgage to people who cannot afford repayments.
What this means is that more than ever lenders have become cautious and are way more discerning towards their customers, to the point of restricting the choices available to applicants.
The days of 95% mortgages are long gone, and mortgage lenders now request for more strict criteria when it comes to lend money.
They are several possibilities when it comes to remortgages, but one of the main questions you will have to face is the distinction between fixed rate and variable mortgages.
In fixed rate products, the rate is fixed, and does not vary, even if the BoE interest rate fluctuates.
The benefit of a fixed rate mortgage deal is that you know from the start what your monthly remortage repayments will be, and you've got the security that these monthly repayments will stay fixed for a fixed period.
Most lenders have got fixed rate deals for length between 3 and 10 years.
The shortcoming of fixed rate deals is that your mortgage doesn't benefit of a drop in the Bank of England interest rate, like the one we have seen recently.
Variable rate mortgages however don't have a fixed rate.
The interest rate goes up and down with the BoE base interest rate.
The interest rate is as general rule determined by the BoE interest rate plus a fixed increment, for example 0.
5% (BoE rate) plus 2%(increment) which gives you an interest rate of 2.
5%.
Because we currently are in a period of low interest rates, variable rate mortgages are an interesting option.
But there is always the possibility that the Bank of England rate might rise, and this would in return increase the rate of variable mortgages.
Do you value the safety of fixed payments and are ready to accept that this might lead to higher mortgage interest? In that case, a fixed rate mortgage deal could be the best choice for your situation.
Would you like to get the lowest possible interest rate, but know that this could give you higher repayments if interest rates increase? Then variable rate deals might be a good option for you.
They have a mortgage on their house, and applying for a remortgage just means attempting to find a better rate on their mortgage than the one they're with at the moment.
For mortgage lenders, however, a remortgage is a huge risk: this means lending a large sum of money.
In the present climate, with the danger of a house price collapse, mortgage lenders are very cautious about how they lend money for mortgages and remortgages, and who can blame them? mortgage lenders want to stay in business, and they must ensure that they don't give a mortgage to people who cannot afford repayments.
What this means is that more than ever lenders have become cautious and are way more discerning towards their customers, to the point of restricting the choices available to applicants.
The days of 95% mortgages are long gone, and mortgage lenders now request for more strict criteria when it comes to lend money.
They are several possibilities when it comes to remortgages, but one of the main questions you will have to face is the distinction between fixed rate and variable mortgages.
In fixed rate products, the rate is fixed, and does not vary, even if the BoE interest rate fluctuates.
The benefit of a fixed rate mortgage deal is that you know from the start what your monthly remortage repayments will be, and you've got the security that these monthly repayments will stay fixed for a fixed period.
Most lenders have got fixed rate deals for length between 3 and 10 years.
The shortcoming of fixed rate deals is that your mortgage doesn't benefit of a drop in the Bank of England interest rate, like the one we have seen recently.
Variable rate mortgages however don't have a fixed rate.
The interest rate goes up and down with the BoE base interest rate.
The interest rate is as general rule determined by the BoE interest rate plus a fixed increment, for example 0.
5% (BoE rate) plus 2%(increment) which gives you an interest rate of 2.
5%.
Because we currently are in a period of low interest rates, variable rate mortgages are an interesting option.
But there is always the possibility that the Bank of England rate might rise, and this would in return increase the rate of variable mortgages.
Do you value the safety of fixed payments and are ready to accept that this might lead to higher mortgage interest? In that case, a fixed rate mortgage deal could be the best choice for your situation.
Would you like to get the lowest possible interest rate, but know that this could give you higher repayments if interest rates increase? Then variable rate deals might be a good option for you.
