Variable And Fixed-Rate Mortgage Advice

When getting a mortgage it’s important to understand the difference between variable interest rates and fixed interest rates. If you are considering a loan, whether applying for a new mortgage, changing your current mortgage or applying for a personal loan, understanding the differences can help you save money and make the right financial decision for your needs.

When looking for a mortgage, with so many options and jargon to understand it can be daunting and often frustrating to find the right mortgage for your needs. If you are struggling to decide if a fixed rate or variable rate mortgage is right for you, our specialist mortgage advisors listen to your needs and explore the market to find the right deal for you.

What is a fixed-rate mortgage?

A fixed-rate mortgage is a type of mortgage where your interest rate is guaranteed to stay the same for a confirmed period of time. A fixed-rate mortgage can offer peace of mind as unlike variable-rate mortgages, you’ll know exactly how much you need to repay each month.

Currently, you are able to fix the interest rate of your mortgage from one up to over ten years. Typically, the longer your fixed-rate period is for, the higher the interest will be, this is because it is harder for the lender to predict what will happen to the market for a longer period of time.

What is a variable-rate mortgage?

A variable-rate mortgage is a type of mortgage where the interest rate is not fixed. Interest rates can be changed and adjusted at a level above a specific benchmark.

Lenders can offer variable-rate mortgages over the entire life of a mortgage loan, as well as offering hybrid, adjustable-rate mortgages, which includes a fixed period followed by variable rates. Variable-rate mortgages are typically favoured by borrowers who believe that interest rates will fall over the course of time of their loan, allowing them to take advantage of their decreased interest rates in line with the market rate.

Fixed vs variable rate mortgage: which is right for you?

Studies have shown that over time, the borrower is more likely to pay less interest with a variable-rate mortgage versus a fixed rate. This however is all subject to historical trends, which are not indicative of future changes. The longer the repayment period of the mortgage is, the greater the impact of any change on interest rates, whether up or down, will have on payments.

When choosing a mortgage, it’s important to consider a wide range of personal factors and balance them in line with the economic marketplace. To ensure you have the right loan selection for your financial circumstances, consider the following:

  • Could you still afford your mortgage repayments if interest rates rise?
  • How long do you intent to live on the mortgaged property?
  • How big of a mortgage repayment can you afford each month?

When deciding between a fixed and variable rate mortgage, you need to consider the absolute worst-case scenario if interest rates were to rise on a variable rate to see if you can still afford the repayments. If interest rates are currently high and expected to fall, then a variable rate might ensure you get to take advantage of the drop and ultimately pay a lower amount of interest on your mortgage. But, if interest rates are climbing, then a predictable, fixed-interest rate mortgage may be the way to go.

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Specialist mortgage advice

Discovering the right mortgage for you can be difficult. If you are looking for a specialist, tailored advice to find you a great mortgage deal, look no further than RH Financial Consultants. With decades of mortgage consultation experience, our experts take into account all of your needs before exploring the market to find you the perfect mortgage for your situation.

For variable and fixed-rate mortgage advice you can depend upon, get in touch today for a free consultation and discover how we can help you make the right  financial decision for your mortgage.

I have been fortunate to deal with R H Financial Consultants for over 25 years and they continue to review my needs (pensions and mortgages principally) at their own behest and advise/recommend reviews and new products as they feel relevant.

– Alan

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