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Should I fix my mortgage?

housesThanks to Brexit, these are uncertain times. If you’ve got a mortgage then uncertainty is the last thing you want. After all, if your monthly repayments skyrocket you might not be able to afford your mortgage and could lose your home. So why not fix your mortgage? At the moment there are more fixed rate mortgage deals on offer since Moneyfacts started compiling figures 12 years ago. What’s more, there are deals aplenty whatever size deposit you have, even if it’s just 5%.

But a mortgage is a big commitment and you don’t want to get it wrong. Here are the arguments for and against fixing your mortgage now.

For: The rates are great. I’ve used figures from London & Country Mortgages but you can look at comparison sites including comparethemarket.com*, Moneysupermarket.com* and uswitch.com*. You can get a two year fixed rate of 1.39% from Sainsbury’s Bank on a 60% loan to value for a remortgage with fees of £1,244 or 1.44% from Halifax for two years if you’re buying rather than remortgaging (again, 60% loan to value, fees this time £1,195). For five years remortgage or buyer, Skipton BS has 1.83% on 60% LTV with £1,995 fees. In comparison, the best variable rate deal is 1.95% from Coventry Building Society on 50% LTV with £999 fees. So unless the variable rate falls, you’re going to be quids in.

Against: Dare I mention Brexit? If it all goes wrong (hardly unlikely) then you might find the Bank of England cuts base rate – which affects what lenders charge for variable rate mortgages. This could mean that you’ll be in a fixed rate which is less attractive than a variable rate. You probably will have to pay a sizeable penalty if you want to get out of a fixed rate early.

For: But at least you will have certainty with a fixed rate. And with base rate at 0.75%, it hasn’t got that far to fall. That means that even if variable rates go up, you’ll probably still be in the money – or not far off - with a fixed rate.

Against: Who knows what the future holds? Five years from now the climate could be very different and you might regret being locked into a financial commitment made years earlier.

For: If you are worried about the long-term, opt for a two or three year fixed rate deal. Although really, it’s best to think of a fixed rate deal as a help to budgeting – you’ll know precisely what your monthly repayments will be – rather than as a way of trying to second-guess the financial shenanigans of the UK. But do take advice if you’re in doubt: this is a big financial decision and not one to be made on the spin of a coin.

See our guide to mortgages here

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Wednesday, 22 May 2019